Capmark Financial Group Inc. Announces 2013 Results

HORSHAM, Pa.--()--Capmark Financial Group Inc. (the “Company”) today issued its Report as of and for the years ended December 31, 2013 and December 31, 2012. The Company reported net income of $91.7 million for the year ended December 31, 2013 and had consolidated total assets of $681.1 million, consolidated total liabilities of $273.8 million, and stockholders’ equity of $373.6 million as of December 31, 2013.

Highlights for 2013 were:

  • Total cash received from asset collections and revenue was $718 million. Included in the total cash received, the Company realized total proceeds of $597 million from the monetization of loan and REO assets, $36 million from investment securities and $66 million of distributions from real estate equity and debt funds.
  • The Company achieved net consolidated income of $92 million primarily as a result of net gains on loans, investments and real estate of $106 million and interest income of $30 million partially offset by $52 million of noninterest expense. The net gains included a $41 million realized gain on interests in collateralized debt obligations that were redeemed or sold.
  • The Company repaid all outstanding deposits at Capmark Bank, which caused its deposit insurance to terminate as of December 31, 2013, after which it was no longer a regulated bank. The shareholder’s equity of Capmark Bank was $75.9 million as of December 31, 2013. On January 1, 2014, the articles of organization of Capmark Bank were amended to change its name to Capmark Utah Inc., which continues to be a wholly-owned subsidiary of CFGI. Capmark Utah Inc. no longer has employees or an independent board of directors.
  • The Company made aggregate distributions to stockholders of $1.05 billion, or $10.50 per share, in 2013 and ended the year with $374 million of stockholders’ equity. Aggregate distributions to stockholders since emergence from bankruptcy, including those in 2013, have been $25.00 per share.
  • The Company paid an additional $74 million to prepetition creditors, including $23 million under the settlement agreement with the Japanese lenders, $7 million under the settlement agreement with creditors of Crystal Ball Holdings of Bermuda Limited and $44 million from the disputed claims reserve. The settlement agreements and the Company’s obligations thereunder were terminated.

On March 5, 2014, the Company entered into an agreement (the “Investment Agreement”) with Centerbridge Capital Partners II, L.P. and certain of its affiliates (“Centerbridge”) for a strategic investment in the Company by Centerbridge, subject to certain terms and conditions. The closing under the Investment Agreement is subject to certain conditions, including approval by the Company’s stockholders of an amendment and restatement of the Company’s existing articles of incorporation required for Centerbridge to make its investments.

Consolidated Balance Sheet

The Company had consolidated total assets of $681.1 million and $2.9 billion as of December 31, 2013 and 2012, respectively, primarily comprised of a portfolio of loans, real estate, real estate-related assets and cash and cash equivalents. Capmark Bank had assets of $83.0 million and $1.4 billion as of the same dates. Assets totaling $135.2 million and $253.5 million were associated with discontinued operations as of December 31, 2013 and 2012, respectively.

The Company had consolidated total liabilities of $273.8 million and $1.5 billion as of December 31, 2013 and 2012, respectively. The Company had liabilities of $77.4 million and $114.7 million associated with discontinued operations as of December 31, 2013 and 2012, respectively.

Total stockholders’ equity was $373.6 million at December 31, 2013 compared to $1.3 billion at December 31, 2012. The decrease is due primarily to the $1.05 billion of cash distributions to holders of the Company’s common stock.

Consolidated Results of Operations

The Company had income from continuing operations before income taxes of $99.0 million in the year ended December 31, 2013, primarily due to $127.7 million of noninterest income and $30.0 million of interest income partially offset by $52.4 million of noninterest expense and $6.3 million of interest expense. Noninterest income of $127.7 million primarily included $41.5 million of realized gains on the dispositions of real estate investments, $40.6 million of realized gains on the redemption and sale of interests in collateralized debt obligations, $23.7 million of realized gains on full or partial dispositions of loans held for sale and $21.0 million due primarily to unrealized gains on real estate equity investment funds and joint ventures. Interest income in the year ended December 31, 2013 included the recognition of $5.5 million of previously deferred interest on loans held for sale. The $52.4 million of noninterest expense included $25.9 million of compensation and benefits costs and $19.6 million of professional fees. The $6.3 million of interest expense primarily included $20.9 million of contractual interest expense from deposit liabilities at Capmark Bank offset by $17.4 million from the accretion of the fresh start accounting premium for the deposit liabilities.

Liquidity

As of December 31, 2013, the Company’s continuing operations had $138.4 million in total cash and cash equivalents (including restricted cash). The following table summarizes the cash, cash equivalents and restricted cash from continuing operations (in thousands):

       

Cash, Cash Equivalents and Restricted Cash

December 31, 2013 December 31, 2012
Non-Capmark Bank:
Cash and cash equivalents $ 99,086 $ 182,726
Restricted cash 11,861 75,219
Capmark Bank cash and cash equivalents   27,449   1,296,156
Total cash, cash equivalents and restricted cash attributable to continuing operations $ 138,396 $ 1,554,101
 

The Company’s primary sources of liquidity from the existing assets are expected to be (1) distributions received from equity investments, (2) proceeds from the resolution of loans, including par payoffs and discounted payoffs received in connection with loan workout efforts and (3) sales of other assets in its portfolio. The Company expects to generate sufficient liquidity from the existing assets to meet its needs for cash in its operations over the next 12 months, including paying its operating expenses.

The following table summarizes the components of restricted cash from continuing operations (in thousands):

       

Restricted Cash

December 31, 2013 December 31, 2012
Distribution escrow $ 9,480 $ 7,462
Bankruptcy disputed administrative, priority and convenience class claims escrow 501 8,865
Cash from consolidated variable interest entities 49,663
Other   1,880   9,229
Restricted cash from continuing operations $ 11,861 $ 75,219
 

In 2013, the Company paid cash distributions to the holders of the Company’s common stock as follows:

       
Record Date Distribution Paid

Distribution

Amount Per Share

March 15, 2013 March 22, 2013

$4.50

June 17, 2013 June 21, 2013 2.50
September 23, 2013 September 27, 2013 1.65
December 27, 2013 December 30, 2013 1.85
 

The Company does not anticipate making additional distributions to shareholders in the near term. The terms of the Investment Agreement with Centerbridge contain certain prohibitions on future distributions by the Company and certain of its subsidiaries. If the Investment Agreement with Centerbridge does not close, the Company will evaluate how to utilize its cash, including whether to make distributions to stockholders.

Supplemental Financial Information

The Company’s Report as of and for the years ended December 31, 2013 and December 31, 2012 and related supplemental financial information may be found on the Company’s website (www.capmark.com) under the heading “Financial Reporting.”

Investor Conference Call

The Company will host an investor call to be broadcast live over the internet on April 1, 2014 at 2:00 p.m. Eastern Time to discuss, among other items, the Report as of and for the years ended December 31, 2013 and December 31, 2012.

To listen to the investor call, please go to 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’s management can participate in the conference call by dialing the following:

  • Toll Free: 877-254-2825
  • Conference ID #20518362

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements. These statements are based on management’s current expectations and beliefs but are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such forward-looking statements are made only as of the date of this release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

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

 
CAPMARK FINANCIAL GROUP INC.
Consolidated Balance Sheet
(in thousands, except share amounts)
 
 
    December 31, 2013     December 31, 2012
Assets
Cash and cash equivalents $ 126,535 $ 1,478,882
Restricted cash (1) 11,861 75,219
Accounts and other receivables (1) 61,019 51,496
Investment securities available for sale 4,974 4,611
Loans held for sale (1) 156,870 591,814
Real estate investments (1) 154,112
Equity investments 177,534 248,350
Other assets (1) 7,172 13,048
Assets of discontinued operations (1)   135,177   253,518  
Total assets $ 681,142 $ 2,871,050  
Liabilities and Equity
Liabilities:
Secured and other borrowings (1) 130,449 222,062
Deposit liabilities 1,018,601
Other liabilities (1) 65,922 127,457
Liabilities of discontinued operations (1)   77,438   114,719  
Total liabilities   273,809   1,482,839  
Commitments and Contingent Liabilities
Equity:
Common stock, $.001 par value; shares authorized — 110,000,000; shares issued and outstanding — 100,182,419 at December 31, 2013 and 100,242,722 at December 31, 2012 100 100
Capital paid in excess of par value 189,820 1,240,834
Retained earnings 182,015 90,313
Accumulated other comprehensive income (loss), net of tax   1,627   (4,885 )
Total Capmark Financial Group Inc. stockholders’ equity 373,562 1,326,362
Noncontrolling interests   33,771   61,849  
Total equity   407,333   1,388,211  
Total liabilities and equity $ 681,142 $ 2,871,050  

____________________

(1)   The following table presents assets of consolidated variable interest entities (“VIEs”) included in each balance sheet line item that can be used only to settle the obligations of the consolidated VIE and liabilities of the consolidated VIE included in each balance sheet line item for which creditors or other interest holders do not have recourse to the general credit of Capmark Financial Group Inc. and its subsidiaries.
 
   

December 31,

2013

December 31,

2012

December 31,

2013

December 31,

2012

Assets Liabilities
Restricted cash $ $ 49,663 Secured and other borrowings $ $ 4,903

Accounts and other
receivables

1,055 Other liabilities 2,011
Loans held for sale 181,794

Liabilities of discontinued
operations

  7,929   13,580
Real estate investments 22,225 Total liabilities $ 7,929 $ 20,494
Other assets 1,482

Assets of discontinued
operations

  41,685   65,606
Total assets $ 41,685 $ 321,825
 
 
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Comprehensive Income
(in thousands, except per share data)
 
 
    Year ended
December 31, 2013
    Year ended
December 31, 2012
Net Interest Income
Interest income $ 29,999 $ 108,985
Interest expense   6,286     48,675  
Net interest income   23,713     60,310  
Noninterest Income
Net gains on loans 26,290 179,019
Net gains (losses) on investments and real estate 79,453 (10,733 )
Other losses, net (5,511 ) (12,226 )
Equity in income of joint ventures and partnerships 24,260 25,452
Fee revenue 341 3,527
Net real estate investment and other income   2,899     (333 )
Total noninterest income   127,732     184,706  
Net revenue   151,445     245,016  
Noninterest Expense
Compensation and benefits 25,943 63,580
Professional fees 19,624 32,034
Occupancy and equipment 2,251 9,498
Other expenses   4,578     27,599  
Total noninterest expense   52,396     132,711  
Income from continuing operations before income tax benefit 99,049 112,305
Income tax benefit   (851 )   (1,700 )
Income from continuing operations after income tax benefit 99,900 114,005
Loss from discontinued operations, net of tax   (22,630 )   (44,329 )
Net income 77,270 69,676
Plus: Net loss attributable to noncontrolling interests   14,432     52,288  
Net income attributable to Capmark Financial Group Inc. $ 91,702   $ 121,964  
Other comprehensive income (loss)
Net change in unrealized gains and losses on investment securities (1,923 ) 2,300
Net foreign currency translation   8,435     (5,568 )
Other comprehensive income (loss)   6,512     (3,268 )
Comprehensive income attributable to Capmark Financial Group Inc. $ 98,214   $ 118,696  
Basic and diluted net income per share - continuing operations $ 1.15 $ 1.67
Basic and diluted net income per share attributable to Capmark Financial Group Inc.   0.92     1.22  
Basic weighted average shares outstanding 99,728 99,607
Diluted weighted average shares outstanding 99,761 99,734
 
 
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands, except number of shares)
 
 
    Year ended
December 31, 2013
    Year ended
December 31, 2012
Common Stock
Number of shares outstanding at beginning of period 100,242,722 100,052,475
Additional shares issued 243,767
Treasury shares retired   (60,303 )   (53,520 )
Number of shares outstanding at end of period   100,182,419     100,242,722  
Common Stock
Balance at beginning of period $ 100 $ 100
Additional shares issued (retired)        
Balance at end of period   100     100  
Capital Paid in Excess of Par Value
Balance at beginning of period 1,240,834 2,692,602
Additional shares issued
Stockholder distributions (1,052,548 ) (1,454,296 )

Treasury shares retired

(267 ) (648 )
Stock-based compensation   1,801     3,176  
Balance at end of period   189,820     1,240,834  
Retained Earnings (Accumulated Deficit)
Balance at beginning of period 90,313 (31,651 )
Net income attributable to Capmark Financial Group Inc.   91,702     121,964  
Balance at end of period   182,015     90,313  
Accumulated Other Comprehensive Income (Loss), net of tax
Balance at beginning of period (4,885 ) (1,617 )
Other comprehensive income (loss)   6,512     (3,268 )
Balance at end of period   1,627     (4,885 )
Total Capmark Financial Group Inc. Stockholders’ Equity   373,562     1,326,362  
Noncontrolling Interests
Balance at beginning of period 61,849 178,960
Net loss attributable to noncontrolling interests (14,432 ) (52,288 )
Other (includes impact of sale of discontinued operations assets)   (13,646 )   (64,823 )
Balance at end of period   33,771     61,849  
Total Equity $ 407,333   $ 1,388,211  
 
 
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows
(in thousands)
 
 
    Year ended
December 31, 2013
    Year ended
December 31, 2012
Operating Activities of Continuing Operations
Net income $ 77,270 $ 69,676
Net loss from discontinued operations   (22,630 )   (44,329 )
Net income from continuing operations 99,900 114,005
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:
Net gains (100,232 ) (156,060 )
Net accretion of fresh start accounting adjustments (17,395 ) (65,242 )
Equity in net gains of investees and cash return on investment (20,454 ) (22,970 )
Stock-based compensation expense 1,801 3,380
Other, net 1,540 9,430
Net change in assets and liabilities which provided (used) cash:
Accounts and other receivables (1,951 ) 91,306
Other assets 5,344 90,493
Other liabilities (58,090 ) (108,017 )
Current taxes payable (19 ) 111
Proceeds from sales of/payments from loans held for sale   455,407     3,075,582  
Net cash provided by operating activities of continuing operations   365,851     3,032,018  
Investing Activities of Continuing Operations
Net decrease in restricted cash 63,358 54,045
Proceeds from sales of investment securities classified as available for sale 46,541 18,916
Repayments of investment securities classified as available for sale 176 570,657
Purchases of investment securities classified as available for sale (11,027 )
Proceeds from sales of real estate investments 195,575 281,577
Proceeds from sales of/capital distributions from equity investments 88,829 101,463
Other investing activities, net   1,782     (1,689 )
Net cash provided by investing activities of continuing operations   385,234     1,024,969  
Financing Activities of Continuing Operations
Repayments of debt (738,959 )
Repayments of secured and other borrowings (91,613 ) (427,810 )
Transfer of deposit liabilities (874,026 )
Repayment of deposit liabilities (1,001,206 ) (1,909,451 )
Distributions to stockholders (1,052,548 ) (1,454,296 )
Other financing activities, net   (9,955 )   2,348  
Net cash used in financing activities of continuing operations   (2,155,322 )   (5,402,194 )
Effect of Foreign Exchange Rates on Cash   (1,024 )   (89 )
Discontinued Operations
Net cash used in operating activities of discontinued operations (6,757 ) (18,192 )
Net cash (used in) provided by investing activities of discontinued operations (7,496 ) 259,613
Net cash used in financing activities of discontinued operations   (22,340 )   (65,016 )
Net cash (used in) provided by discontinued operations   (36,593 )   176,405  
Net Decrease in Cash and Cash Equivalents (1,441,854 ) (1,168,891 )
Cash and Cash Equivalents, Beginning of Period(1)(2)   1,568,920     2,737,811  
Cash and Cash Equivalents, End of Period(2)(3) $ 127,066   $ 1,568,920  

 

 

Supplemental Disclosures of Cash Flow Information:
Income taxes refunded, net $ 877 $ 11,248
Interest paid 34,849 143,276
Non-cash Investing and Financing Activities:
Transfer of loans held for sale to real estate 20,309
Transfer of real estate to loans held for sale 14,549

____________________

Notes:

 
(1) Cash and cash equivalents exclude restricted cash of $232.7 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $4.4 million, respectively as of December 31, 2011.
 
(2) Cash and cash equivalents exclude restricted cash of $150.4 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $90.0 million, respectively as of December 31, 2012.
 
(3) Cash and cash equivalents exclude restricted cash of $93.9 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $0.5 million, respectively as of December 31, 2013.
 

Contacts

Capmark Financial Group Inc.
Thomas L. Fairfield, 215-328-1555

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Contacts

Capmark Financial Group Inc.
Thomas L. Fairfield, 215-328-1555