Capmark Bankruptcy Offical

In a move widely anticipated by the financial community now for months, mega commercial lender Capmark has officially filed for bankruptcy. As large as Capmark is, it is relatively small in comparison the larger players in the commercial real estate industry and is the canary in the coal mine for certain turmoil in the industry moving forward.

Commercial loans from the 2004-2007 era typically had a 5 year fuse before refinancing or payment. The most highly leveraged, bubble era transactions took place in 2006 & 2007 (not to downplay the bone headed deals from 2004-2005).

As more loans begin to tick down to repayment and or refinancing, ownership groups are finding that their assets now have negative equity and the balance due on their loans are 10%-60% above the market price of the assets.

Capmark Financial Files for Bankruptcy

By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) -- Capmark Financial Group Inc., one of the largest commercial real-estate lenders in the U.S., said Sunday that it and some of its subsidiaries have filed for bankruptcy protection.

The firm said it has filed motions to allow it to continue to pay vendors and salaries, and that the move "should not impact the way Capmark does business with its customers and partners."

"As of October 23, 2009, Capmark and its filing subsidiaries had in excess of $500 million of cash and cash equivalents ... available to fund its operations," it said in a statement.

The lender added that it "continues to look for appropriate strategic outcomes for certain of its businesses."

The move could add to concern that the commercial real-estate market is struggling as much as the residential side. See earlier story on Capmark.

A group of funds -- composed of Kohlberg Kravis Roberts & Co, Goldman Sachs Group's /quotes/comstock/13*!gs/quotes/nls/gs (GS 180.36, -3.33, -1.81%) Goldman Sachs Capital Partners and Five Mile Capital -- owned 75.4% of Capmark, while GMAC LLC owned 21.3%, and Capmark employees and directors owned most of the remainder, according to a Reuters report citing the bankruptcy filing.

Capmark listed $20.1 billion in assets and $21 billion in liabilities as of June 30 in its Wilmington, Del.-bankruptcy filing, the report said.

Capmark, formerly GMAC's commercial property arm, had recently reported a second-quarter loss of $1.6 billion.

The company said its Capmark Bank unit is not included in the filing, nor are Capmark Investments LP, Capmark Securities Inc. and Capmark's Asian, Indian and European subsidiaries.

Subsidiaries filing for Chapter 11 protection included Capmark Finance Inc., Capmark Capital Inc., Capmark Equity Investments Inc., Mortgage Investments LLC, Net Lease Acquisition LLC, SJM Cap LLC, Capmark Affordable Equity Holdings Inc., Capmark REO Holding LLC, Summit Crest Ventures LLC, Capmark Affordable Equity Inc. and 33 other low-income housing tax credit entities, it said.