HORSHAM, Pa.--()--Capmark Financial Group Inc. (the “Company”) today issued its Report on Balance Sheet as of September 30, 2011. The Company and certain of its debtor subsidiaries emerged from bankruptcy on September 30, 2011 (the “Effective Date”). Pursuant to the Company’s joint Plan of Reorganization (the “Plan”), the Company made the following distributions for the benefit of holders of allowed general unsecured claims1 on the Effective Date:
“Fair Value in Excess of Reorganization Value.”
- $900 million in cash
- $1.25 billion in new secured Floating Rate First Lien A and B Notes (the “Secured Notes”)
- 99.5 million shares of new common stock
The following additional payments were also made on the Effective Date:
- $85 million in cash to the holders of the Company’s former unsecured loans and unsecured notes pursuant to the terms of a settlement agreement between the holders of the former unsecured loans and unsecured notes and one of the Company’s Bermuda subsidiaries (the “Crystal Ball Settlement Agreement”)
- $21.8 million in cash for the benefit of holders of allowed priority, administrative and convenience class claims1
- $9.2 million for professional expenses
Business Overview
The Company continues to focus its efforts on effectively managing and monetizing its existing assets and operations. Recent highlights include:
- Sale of substantially all of the low-income housing tax credit (“LIHTC”) platform assets to affiliates of Hunt Companies, Inc. with an initial closing on October 7, 2011 resulting in net proceeds of $60 million
- Prepayments of $361.0 million and $150.0 million of the Secured Notes on October 5 and December 1, 2011 respectively, leaving a remaining outstanding principal balance of $739.0 million
- Payment of an additional $22.5 million to the holders of the Company’s former unsecured loans and unsecured notes under the Crystal Ball Settlement Agreement on October 18, 2011
- Payment of ¥3.0 billion (approximately $39.3 million) by two of the Company’s Japanese subsidiaries (the “Japanese Borrowers”) to the holders of the Japanese Yen denominated portions of the Company’s former unsecured loans (the “Japanese Lenders”) on October 7, 2011 pursuant to the terms of a settlement agreement between the Company, the Japanese Borrowers and the Japanese Lenders
- Appointment of a new eight member Board of Directors of the Company upon emergence from bankruptcy, including six independent directors
In addition, the Company has engaged Houlihan Lokey Capital, Inc. as a financial advisor and investment banker to assist the Company in evaluating strategic alternatives for its Capmark Bank subsidiary and its domestic non-bank loan portfolios including, but not limited to, sales, distributions, dividends or other dispositions of portfolios of loans or a sale of stock, merger or other business combination involving Capmark Bank. The implementation of any strategic alternative may be subject to regulatory approval. There can be no assurance that any strategic alternative will ultimately be completed.
On the Effective Date, $39.0 million in cash, $54.2 million in Secured Notes and 5.5 million shares of new common stock were deposited with the Plan disbursing agent into the disputed claims reserve account for the benefit of the holders of general unsecured claims that have not been allowed. In accordance with the terms of the Plan, if a disputed claim is not resolved in favor of a claimant, the funds are periodically reallocated and disbursed to the other general unsecured creditors. The Company will post information regarding the first distribution of funds from the disputed claims reserve to its website under the heading “Reorganization” on or about December 31, 2011.
Consolidated Balance Sheet
The consolidated balance sheet of the Company as of September 30, 2011 was prepared utilizing fresh start accounting, which required that all tangible assets and liabilities be re-measured at fair value. As of September 30, 2011, the Company had $10.0 billion of assets, including approximately $2.1 billion of cash and cash equivalents, $701.0 million of investment securities available for sale, $4.4 billion of loans held for sale and $1.0 billion of real estate and equity investments. The Company also had $486.4 million of restricted cash at that date. Assets of the discontinued LIHTC operations were $1.1 billion. Of the total assets, $6.2 billion were held by Capmark Bank.
Substantially all of the assets of the Company and the subsidiaries which act as guarantors of the Company’s Secured Notes, exclusive of Capmark Bank and its assets, are pledged as collateral for the Secured Notes. The excess cash flow generated by the obligors under the Secured Notes is required to be utilized as payment for the Secured Notes.
The consolidated balance sheet of the Company includes $6.8 billion of liabilities, including $1.25 billion of Secured Notes, $4.4 billion of liabilities at Capmark Bank and $555.1 million associated with discontinued operations. Capmark Bank’s liabilities are primarily comprised of $3.9 billion of Federal Deposit Insurance Corporation insured deposit liabilities and $394.8 million of fully secured Federal Home Loan Bank of Seattle borrowings.
Total stockholders’ equity was $2.7 billion at September 30, 2011.2 Total equity of $3.1 billion includes $469.4 million of noncontrolling interests from which the Company does not expect to derive any material value.
Liquidity
As of September 30, 2011, the Company’s continuing operations had $2.5 billion in total cash and cash equivalents (including restricted cash), of which $1.6 billion was held by Capmark Bank and $901.9 million was held outside Capmark Bank. In addition, Capmark Bank held $688.5 million of highly rated government agency and other short term investment securities that the Company considers to be similar to cash equivalents.
Of the $901.9 million in cash and cash equivalents held by the non-Capmark Bank companies, $361.0 million was paid to the indenture trustee on September 30, 2011 to fund the October 5, 2011 redemption of Secured Notes and $125.4 million was restricted under current contractual or other restrictions.
Utilizing cash from monetization activities, the Company repaid an additional $150.0 million of Secured Notes on December 1, 2011. An additional $22.5 million was paid to the holders of the Company’s former unsecured loans and unsecured notes pursuant to the Crystal Ball Settlement Agreement on October 18, 2011.
The following table summarizes the cash, cash equivalents and restricted cash from continuing operations as of September 30, 2011 (in thousands):
| Cash, Cash Equivalents and Restricted Cash | September 30, 2011 | |
| Capmark Bank: | ||
|
Cash and cash equivalents |
$1,641,887 | |
| Non-Capmark Bank: | ||
| Cash and cash equivalents – Asia Operations | 206,002 | |
| Cash and cash equivalents – Other Non-Capmark Bank | 209,496 | |
| Cash and cash equivalents – Total Non-Capmark Bank | 415,498 | |
| Restricted cash | 486,427 | |
| Total cash, cash equivalents and restricted cash from continuing operations | $2,543,812 | |
The following table summarizes the components of restricted cash as of September 30, 2011 (in thousands):
| Restricted Cash | September 30, 2011 | |
| Secured Notes principal payment escrow | $ 361,041 | |
| Cash from consolidation of entities under ASC 810 | 66,922 | |
| Secured Notes interest escrow | 25,000 | |
| Bankruptcy disputed claims escrow | 19,612 | |
| Other | 13,852 | |
| Restricted cash from continuing operations | $ 486,427 | |
The Company expects to generate sufficient liquidity to meet its needs for cash in its non-Capmark Bank operations over the next 12 months, including primarily paying its operating expenses and interest payments on the Secured Notes. The Company also expects that Capmark Bank will generate sufficient liquidity to meet its needs for cash for the next 12 months, including primarily paying its operating expenses and interest and principal due on maturing certificates of deposit and other liabilities. Excess cash (as defined in the indenture governing the Secured Notes) held at the end of each fiscal quarter is required to be used to repay principal of the Secured Notes.
The Company’s primary sources of liquidity are expected to be (1) proceeds from the repayment of loans, (2) proceeds from the sale of loans, including discounted payoffs received in connection with loan workout efforts, and (3) proceeds from the sale of real estate acquired through foreclosure, equity investments and other assets in our portfolio. Capmark Bank is prohibited under cease and desist orders agreed to with the Federal Deposit Insurance Corporation and the Utah Department of Financial Institutions (the “C&D Orders”) from paying dividends to the Company. Accordingly, the Company does not currently expect to receive any dividends from Capmark Bank while the C&D Orders remain in effect and does not rely upon Capmark Bank as a source of liquidity.
Supplemental Financial Information
The Company’s Report on Balance Sheet as of September 30, 2011 and supplemental financial information as required by the indenture for the Secured Notes may be found on the Company’s website (www.capmark.com) under the heading “Indenture Reporting.”
Conference Call
The Company will hold a conference call for investors to be broadcast live over the Internet on December 21, 2011 at 11:00 a.m. Eastern Standard Time regarding the topics addressed in this news release and the Report on Balance Sheet as of September 30, 2011 and related supplemental financial information. To listen to the conference call, please go to the Company’s website (www.capmark.com) under the heading “Investor Relations” at least fifteen minutes prior to the scheduled start time to download and install any necessary audio software. For those who are unable to listen to the live broadcast, an archived replay will be available on the website for a period of time. Investors who have questions for the Company management can participate in the conference call by dialing in to one of the following numbers:
- Toll Free: 877-407-8035
- International: 201-689-8035
About Capmark®:
Capmark is a real estate finance company focused on the management of its commercial real estate-related assets and businesses with a view to maximizing their value. Capmark is headquartered in Horsham, Pennsylvania and operates principally in North America.
For more information, visit www.capmark.com.
About Houlihan Lokey:
Houlihan Lokey is an international investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. Houlihan Lokey has 14 offices and more than 800 employees in the United States, Europe and Asia. The firm serves more than 1,000 clients each year, ranging from closely held companies to Global 500 corporations. For more information, visit www.HL.com.
1 A portion of these distributions were paid into various disputed claims reserve accounts with Wilmington Trust, as Plan disbursing agent, and will be distributed in accordance with the Plan.
2 The projections included with the Second Amended Disclosure Statement approved by the Bankruptcy Court reflected the excess of consolidated stockholders’ equity over the $1.8 billion estimated value of the Company’s stock upon emergence as a component of equity entitled “Fair Value in Excess of Reorganization Value.” This excess was primary attributable to a discount applied to the value of future cash flows as well as future operating and selling costs. The Company’s balance sheet at September 30, 2011 reflects only total stockholders’ equity.
| CAPMARK FINANCIAL GROUP INC. | ||
| Consolidated Balance Sheet (unaudited) | ||
| (in thousands, except share amounts) | ||
|
September 30, 2011 |
||
| Assets | ||
| Cash and cash equivalents | $ 2,057,385 | |
| Restricted cash (1) | 486,427 | |
| Accounts and other receivables (1) | 74,985 | |
| Investment securities available for sale | 701,022 | |
| Loans held for sale (1) | 4,396,014 | |
| Real estate investments (1) | 669,895 | |
| Equity investments | 333,251 | |
| Other assets (1) | 113,267 | |
| Assets of discontinued operations (1) | 1,119,857 | |
| Total assets | $ 9,952,103 | |
| Liabilities and Equity | ||
| Liabilities: | ||
| Debt | $ 1,353,025 | |
| Other borrowings (1) | 653,440 | |
| Deposit liabilities | 3,926,004 | |
| Other liabilities (1) | 304,236 | |
| Liabilities of discontinued operations (1) | 555,084 | |
| Total liabilities | 6,791,789 | |
| Commitments and Contingent Liabilities | ||
| Equity: | ||
|
Common stock, $.001 par value; 110,000,000 shares authorized; 100,000,000 shares issued and outstanding as of September 30, 2011 |
100 | |
| Capital paid in excess of par value | 2,690,800 | |
| Total stockholders’ equity | 2,690,900 | |
| Noncontrolling interests | 469,414 | |
| Total equity | 3,160,314 | |
| Total liabilities and equity | $ 9,952,103 | |
(1) The following unaudited table presents assets of consolidated variable interest entities (“VIEs”) that can be used only to settle the obligations of the consolidated VIE and liabilities of the consolidated VIE for which creditors or other interest holders do not have recourse to the general credit of Capmark Financial Group Inc. and its subsidiaries. Approximately 72% of the assets and 84% of the liabilities shown below related to LIHTC entities that were sold on October 7, 2011.
| Assets | Liabilities | |||||||
| Restricted cash | $ | 70,480 | Other borrowings | $ | 2,300 | |||
| Accounts and other receivables | 5,064 | Other liabilities | 12,892 | |||||
| Loans held for sale | 370,060 |
Liabilities of discontinued operations |
423,281 | |||||
| Real estate investments | 124,508 | Total liabilities | $ | 438,473 | ||||
| Other assets | 5,510 | |||||||
| Assets of discontinued operations | 896,405 | |||||||
| Total assets | $ | 1,472,027 | ||||||
Facebook
Twitter
LinkedIn
Delicious
Reddit
StumbleUpon
Digg
MySpace
Newsvine
Google Bookmark
Yahoo! Bookmark
Email
Email 
