Sunday, October 25, 2009

Capmark Craps Out

Capmark Financial Group, formerly GMAC's commercial real estate finance arm spun off to a consortium of KKR, Goldman Sachs Capital Partners, and Five Mile Capital Partners three years ago for a cool $2.1 billion, has filed Chapter 11 bankruptcy in Delaware. Word is that KKR had all ready written off its investment in toto. Gee, someone knows how to mark to market after all. A Warren Buffett entity had an offer on the table to buy every asset that mattered for $490 million (Over 75% hair cut! Love them green shoots!), but the bankruptcy will require more of the deal to be cash, so we'll see if The Sage walks away. If he does, the only "reorganization" coming out of this Chapter 11 will be moving the chairs around at the auction of everything that can be characterized as an asset.

Note that Capmark Bank, Capmark's wholly-owned industrial bank based here in Utah to take advantage of our nonexistent banking laws, is not part of this bankruptcy. Now before all you jingos start going, "Hoowah Utah!" be aware that earlier this month the FDIC forced Capmark and Capmark Bank into a series of cease and desist orders that: 1) required Capmark to pony up an additional $600 million in capitalization for Bank, 2) requires Bank to file a new cap plan by Thanksgiving, and 3) effectively precludes Bank from even breaking a roll of quarters without prior FDIC approval. With Capmark in BK, that cap plan is about as likely as my winning the Mr. Universe title. Worse, the US Trustee in Delaware may well say, "That $600 million needs coughed up and put in the bankruptcy estate." Which means that Capmark Bank and its $10-11 billion in "assets" (not marked to market) is circling the drain as we speak.

On top of all this, a 4 September article from Bloomberg said that regulators ranked Capmark Bank as "well-capitalized." The C&D orders were entered less than a month later. Is there anyone driving this bus? Do I really need to ask that question?

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