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Capmark gets approval to sell mortgage business

The bankrupt lender will sell its North American mortgage business to Warren Buffett’s Berkshire Hathaway and the holding company Leucadia National Corporation for $515m.

Capmark Financial has been given the right to sell its US servicing and mortgage business to Warren Buffett’s Berkshire Hathaway for $515 million.

Berkshire said it wanted to buy the business in a joint venture with holding company Leucadia National Corporation in September, just as Capmark revealed it was eyeing Chapter 11 bankruptcy protection following losses in the second quarter of $1.6 billion.

A statement from Capmark yesterday said a Delaware bankruptcy court had approved the sale of its servicing and mortgage banking businesses to Berkadia Commercial Mortgage for a total purchase price of $515 million – more than the $490 million originally stated.

The transaction is expected to close by year-end.

Capmark filed for Chapter 11 in October, a move that is expected to result in the loss of $2.1 billion in equity invested in the company by Kohlberg Kravis Roberts, Five Mile Partners and Goldman Sachs.

The trio bought Capmark in a $16.8 billion deal in 2006, giving them a 78 percent stake in the lender. Previous financial statements filed by KKR Private Equity Investors, the listed vehicle with which the parent recently merged, suggested KKR was already holding the investment at zero or near zero.

Capmark said in a statement in October the company planned to restructure thereby “reduc[ing] its corporate debt and maximis[ing] value for its stakeholders”. It added that more than 40 of its subsidiary businesses included in the filing were operating as normal. 

Not in the bankruptcy filing were divisions including Capmark Bank, Capmark Securities and Capmark Investments, which manages value-added and opportunistic commingled real estate funds and separate accounts. However, the company said that these subsidiaries could also file for Chapter 11 protection at a later date.