Commercial Lender Capmark Financial Group Files For Chapter 11 Protection

Capmark Financial Group, a Pennsylvania-based commercial real-estate lender, announced Sunday that it has filed for Chapter 11 bankruptcy protection as it aims to reorganize business under the pressure of mounting debt. 

The lender recently posted a $1.6 billion loss for the quarter ended June 30, as it was forced to take large provisions of $345.8 million to cover bad loans.

There has been much talk of commercial real estate being the next “shoe to drop” in the fallout of the credit and real estate markets.  The Capmark filling certainly supports those expectations as the company has a loan portfolio of $10.7 billion, which is down from $12.2 billion at the end of 2008.

According to the documents filed in a Delaware Bankruptcy court, Capmark listed $21 billion in debt and assets totaling $22 billion.

“We view this reorganization process as an unfortunate but necessary response to recent unprecedented conditions in financial and commercial real estate markets, which presented a significant challenge for Capmark and similarly situated finance companies,” said President and CEO Jay Levine in a press release.

Capmark’s filing is not the first step in restructuring efforts.  The lender’s investment unit, Capmark Investments, sold management contracts to Ventras Capital Advisors LLC back in July, while also entering into a sub-advisory agreement in September with Urdang Capital Management Inc.

The lender also entered into a new $1.5 billion term loan facility back in late May, with amendments also to existing senior credit facility.  Capmark used a portion of proceeds from that agreement to refinance some of its existing credit agreements

It is now obvious that a continued rise in loan losses caused the need for additional action, evidenced by the bankruptcy reorganization filing.

“The Chapter 11 process will give Capmark the opportunity to restructure our balance sheet while continuing to focus on maximizing value for our principal stakeholders,” said Chief Restructuring Officer Mohsin Meghji.    

75.4 percent of Capmark Financial is owned by a group that incudes KKR & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners.  GMAC owns a 21.3 percent stake in the firm.