Capmark Financial Group inks asset put agreement; bankruptcy possible

By Caroline Salls

Pittsburgh, Sept. 2 - Capmark Financial Group Inc. and its wholly owned subsidiaries Capmark Finance Inc. and Capmark Capital Inc. have entered into an asset put agreement with Berkadia III, LLC, a newly formed entity owned by Berkshire Hathaway Inc. and Leucadia National Corp., according to a company news release.

Capmark said the agreement provides for a put option under which the company and its subsidiaries have the right to sell their North American servicing and mortgage banking business and all related assets to Berkadia.

According to the release, the Capmark entities paid $40 million in cash to Berkadia for the put option.

If the put option is exercised by the sellers, the acquired assets will be transferred for a total purchase price of $490 million, subject to various closing adjustments, including an upward adjustment for servicing advances and warehoused loans.

If the sale occurs outside of bankruptcy, Capmark said the purchase price will consist of a $375 million payment in cash at the closing, a $40 million holdback retained by Berkadia to cover indemnity claims and a $75 million note, which is subject to reduction for losses in Capmark's Fannie Mae DUS portfolio.

Meanwhile, if the sale is completed in bankruptcy, the purchase price will consist of a $415 million payment in cash at the closing and the note.

If it does file Chapter 11 bankruptcy, Capmark said exercise of the put option would be incorporated into a bankruptcy sale process under which the company would seek court approval to exercise the option and close on the sale, subject to receipt of higher offers.

The put option will expire within 60 days of the execution of the agreement if not exercised by the Capmark entities, unless the company files for bankruptcy before the 60th day, in which case it would have an additional 60 days from the bankruptcy filing to exercise the put option.

According to a separate news release, Capmark has been exploring strategic alternatives for all of its businesses as part of its efforts for a longer-term restructuring.

Capmark said its restructuring efforts may also include a Chapter 11 bankruptcy filing, the sale of additional businesses or a contribution of cash or assets into wholly owned industrial bank subsidiary Capmark Bank.

The company said the Federal Deposit Insurance Corp. has notified Capmark Bank that it intends to issue an administrative order, which will impose requirements and restrictions on the bank, including requiring submission of capital and liquidity plans, restrictions on affiliated party transactions and other activities.

Pending issuance of the administrative order, the FDIC has notified Capmark Bank that it should obtain the agency's consent before engaging in any transaction that would significantly change the bank's balance sheet composition, including growth in total assets or significant changes in its primary funding sources.

Capmark is a Horsham, Pa.-based company that provides financial services to investors in commercial real estate-related assets.

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