*Capmark files for bankruptcy
*Capmark did not reach agreement with creditors
*Capmark had $20.1 bln in assets as of June 30
(Adds details in paragraphs 4 and 11)
By Caroline Humer
NEW YORK, Oct 25 Commercial real estate company
Capmark Financial [CPFNG.UL] filed for bankruptcy protection on
Sunday, wiping out the investment of several private equity
firms including Kohlberg Kravis Roberts & Co [KKR.UL].
Capmark, which was created in March of 2006 through a
leveraged buyout of the commercial real estate assets of
General Motors' [GM.UL] finance arm GMAC, had said earlier this
year that it might file for bankruptcy.
The company said in a statement the move was due to
conditions in the financial and commercial real estate markets
and a lack of available capital.
Capmark said that it had been negotiating the terms of the
bankruptcy with its creditors, which include banks Citigroup
(C.N) and JPMorgan Chase (JPM.N) among others, but that it had
not reached an agreement on a prearranged bankruptcy.
The company said its Utah-based bank, Capmark Bank, is not
part of the filing. Capmark Investments, Capmark Securities and
its Asian, Indian and European units are also not in the
bankruptcy, it said.
A company spokeswoman was not immediately available for
Capmark listed $20.1 billion in assets and $21 billion in
liabilities as of June 30, 2009 in the bankruptcy filing, which
was made in U.S. Bankruptcy Court in Wilmington, Delaware.
Capmark, which posted a $1.62 billion second-quarter loss,
has been trying to raise cash through targeted sales and plans
to sell its mortgage and loan servicing business. In September
it signed a deal to sell that business to Berkshire Hathaway
(BRKa.N) and Leucadia National (LUK.N) for $490 million.
Under the terms of that deal, a sale will still take place
in bankruptcy court with the Berkshire and Leucadia offer
setting a floor price in an auction.
But only certain businesses are for sale, a source with
direct knowledge of the bankruptcy said. There are no immediate
plans to sell any assets like loans because they would have to
be sold at a steep discount, he said.
By Capmark holding onto those securities, it removes the
fear among some restructuring experts that the company would
unload those assets at fire sale prices and force other
companies to write down their own holdings. [N13192380]
The company said it had $500 million of cash and cash
equivalents available to fund its operations as of Oct. 23. The
source said it would not need any immediate additional
financing for bankruptcy such as a debtor-in-possession loan.
PRIVATE EQUITY OWNERS LOSE
The bankruptcy is a red mark for private equity firms KKR,
Goldman Sachs Group's (GS.N) Goldman Sachs Capital Partners and
Five Mile Capital, which bought Capmark for $1.5 billion in
cash and more than $7 billion in debt.
According to the bankruptcy filing, the group owned 75.4
percent of the company while GMAC, or the General Motors
Acceptance Corp, owned 21.3 percent. Employees and directors
owned most of the remaining stock. Equity investors are
typically left with nothing after a bankruptcy.
KKR, which wrote down its investment in Capmark to zero
earlier this year, has had other failed equity investments this
year, including its 2005 purchase of doormaker Masonite. It
filed for bankruptcy in March and has since emerged from
The Horsham, Pennsylvania-based company has three main
commercial real estate businesses; lending and mortgage
banking, investments and funds management and servicing. It had
more than $288 billion in commercial real estate loans as of
The company is being advised by law firms Dewey & LeBoeuf
and Richards, Layton & Finger and Reed Smith; advisory firms
Lazard Freres, Loughlin Meghji and Beekman Advisors; and
accounting firm KPMG.
The case is in re: Capmark Financial Group, U.S. Bankruptcy
Court, District of Delaware, No. 09-13684.
(Reporting by Caroline Humer; Additional reporting by Megan
Davies and Thomas Hals; Editing by Richard Chang and Diane