Warren Buffett’s Berkshire Hathaway and Leucadia National have committed to spend as much as $490 million on real estate-related assets from Capmark Financial Group as the lender weighs a bankruptcy filing. Capmark, owned by firms including KKR and Goldman Sachs paid $40 million for the option to sell its loan-servicing and mortgage business to the partnership of Berkshire and Leucadia, the Pennsylvania-based lender said. According to Bloomberg, Capmark reported a $1.6 billion second-quarter loss and said the Federal Deposit Insurance Corp. intends to order the company to bolster capital and liquidity. The Berkshire and Leucadia joint venture, Berkadia III, will pay $415 million in cash for the mortgage business if Capmark enters bankruptcy. The venture would also pay $75 million in the form of a note that can be reduced depending on losses in Capmark’s portfolio financing multifamily apartments backed by Fannie Mae. Outside of bankruptcy, Berkadia III will pay $375 million in cash and the $75 million note that can be adjusted for the losses. The buyers will also provide a $40 million “holdback” they will retain to cover indemnity claims. Capmark is one of the largest U.S. commercial real estate finance companies, with more than $10 billion in originations. But, its mortgage assets have been deteriorating since mid- 2007, Moody’s said in a May 5 report, as credit markets seized up.
Berkshire, Leucadia Move in for Capmark Deal
Capmark reported a $1.6 billion second-quarter loss and said the Federal Deposit Insurance Corp. intends to order the company to bolster capital and liquidity
September 3, 2009