Commercial Real Estate Giant Files for Bankruptcy

Capmark Financial – a leading commercial real estate lender – recently filed for Chapter 11 bankruptcy protection in the Delaware Bankruptcy Court, reports the Wall Street Journal.

The move comes as the business property market continues to decline after several slow years. Many

Many U.S. banks have been hurt by losses on commercial real estate loans. High unemployment means consumers have less to spend forcing many businesses to close. Now, however, fewer businesses are expanding or even stepping up and filling vacant space, leaving a glut of business property in many places across the country.

Many developers have been forced to default on loans because they can’t afford to pay them back. Capmark, for example, lost $1.6 billion last quarter in revenue. The company could have lost a lot more revenue if not for some planning that allowed them to set aside $345.8 billion to cover any future loan losses.

Capmark listed their debt at $21 billion and assets at $20.1 billion. The company is hoping to reduce its debt while maintaining their daily operations.

President and CEO Jay Levine said in a press release: “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.“

Capmark recently entered an agreement with a company owned by Warren Buffet Berkshire Hathaway and Leucadia National Corp called Berkadia III LLC. The deal is for Capmark to sell its North American servicing and mortgage banking operations to the company.

Since the company filed Chapter 11 bankruptcy protection, it will now receive $415 million and a $75 million note in the deal with Berkadia. If the companies completed the deal outside of bankruptcy protection, Capmark would have received a lesser payment of $375 million in cash.

Capmark claims that its bank – Capmark Bank – is not a part of the Chapter 11 bankruptcy protection filing, according to a MSNBC report. The bank recently received $600 million in new equity from Capmark Financial. The bank will continue its operations as normal and keep serving customers.

Capmark – at this point – has more than $500 million in cash to support its daily operations. The company said they have enough liquidity to pay for vendors and their services as well employees salaries and their benefits.

Get more information on chapter 7 bankruptcy and business filings.