Capmark Financial reorganization plan approved; $4 billion recovery

By Jim Witters

Wilmington, Del., Aug. 19 - Capmark Financial Group Inc. received conditional approval of its joint plan for reorganization and promised nearly $4 billion of value to creditors during a hearing on Friday in U.S. Bankruptcy Court for the District of Delaware.

During the hearing, judge Kevin Gross also approved the sale of substantially all of Capmark's remaining assets from low-income-housing tax credits at an auction scheduled for Sept. 15.

The stalking horse bidder is Bear Creek Multi-Family Investments LLP. Bear Creek has agreed to pay $92.7 million for the assets if no higher bidder emerges before the Sept. 13 deadline.

The sale agreement also includes intellectual property, computer systems and the right to buy future assets as they become available. A sale hearing is tentatively scheduled for 1 p.m. ET on Sept. 20.

The judge confirmed the reorganization plan on the conditions that oral amendments made during the hearing be incorporated into the plan and minor language changes may occur over the weekend, as counsel for the debtors and the official committee of unsecured creditors work out a few issues.

During the hearing, ASM Capital III LP objected to a scheduled intercompany claim between Capmark Financial Inc. and Capmark Financial Group Inc.

ASM attorney Samuel H. Israel said his client was "very concerned" that this $4.7 billion claim was going to be paid under the plan. He said the sum represents 40% of all claims and dilutes the ASM claim by 40%. He said all intercompany claims usually are wiped out during Chapter 11 proceedings.

Israel said that the plan submitted for confirmation required a reserve that matched the amount of any disputed claims, and he asked judge Gross to force Capmark to hold the entire disputed $4.7 billion in reserve until the issue is addressed.

Debtors attorney Michael P. Kessler said the intercompany claim is a bookkeeping entry that affects only relatively few claimants who hold interest in either Capmark Financial Inc. or Capmark Financial Group Inc. He said it would be wrong to withhold recovery from all Capmark creditors until ASM's $4 million claim is settled.

Judge Gross told Israel his "position is wholly inequitable" and allowed Kessler to amend the plan's reserve provisions to permit a smaller reserve, likely less than $10 million.

Kessler said the reorganization involves 14 debtors, while 32 others are not intended for reorganization. Those 32 are single-purpose entities or entities that handled low-income-housing tax credit business that the reorganized company does not intend to pursue.

Under the plan, all common stock of Capmark Financial Group Inc. will be canceled. The reorganized company will issue common stock with an implied value of $1.8 billion and $1.25 billion of notes and pay $900 million in cash to creditors.

The $900 million figure does not include payments to be made for administrative claims, priority and non-priority tax claims or convenience claims, Kessler said.

Treatment of creditors will include:

• Holders of administrative expense claims, convenience claims and priority tax claims will be paid in full in cash;

• Holders of general unsecured claims will receive a share of cash, new debt securities and new common stock in the reorganized company;

• Holders of junior unsecured subordinated debenture claims and junior unsecured subordinated debenture guaranty claims will receive no distribution; and

• Existing equity interests will be cancelled and extinguished and holders will receive no distribution.

Capmark Financial, a commercial real estate finance company based in Horsham, Pa., filed for bankruptcy on Oct. 25, 2009. Its Chapter 11 case number is 09-13684.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.