Capmark Financial Group Inc. announced Friday that it has abandoned plans to sell off the controlling interest it holds in its bank subsidiary, Utah-based Capmark Bank, after unsettling market conditions broke apart negotiations.
Capmark Financial executives, who are reorganizing the parent company's finances under Chapter 11 bankruptcy protection, blamed the deal's termination on recent financial instability.
"Clearly, the difficulties and uncertainty in the market over the past week made it very difficult to finish a negotiation," said Chief Operating Officer Thomas Fairfield in an interview Friday.
Fairfield didn't identify the once-interested buyer with whom Capmark Financial engaged in "extensive negotiations." He also didn't disclose the terms of the failed deal.
Fairfield said the development won't affect Capmark Financial's bankruptcy-exit plan, which a Delaware bankruptcy judge is expected to review at a hearing on Aug. 19. That plan, which lays out a proposal to pay off the company's creditors, wasn't written to account for the bank sale.
Capmark Financial's reorganization plan counts on unsecured creditors accepting payment in the form of $1.25 billion worth of new debt, cash and stock in the reorganized company. Estimates show that general unsecured creditors, owed upwards of $7 billion, will share $3.8 billion in value for a recovery of about 56%. Capmark Bank accounts for an estimated $1.29 billion of that value, according to court papers filed with the U.S. Bankruptcy Court in Wilmington, Del.
Throughout its restructuring, Capmark Financial - once one of the country's largest commercial real estate lenders - sold off many of its businesses, including its mortgage and loan-servicing business, and used the money to shore up Capmark Bank and pay off lenders.
The bank, which used to be part of Capmark's wide-ranging business of real-estate investing, absorbed at least $650 million of the company's cash on orders of regulators.
Fairfield defended the bank's health on Friday, pointing out that its equity topped $1.8 billion as of June 30.
On its website, the bank said its total assets equaled $7.9 billion as of March 31 and its outstanding deposits totaled $5.3 billion.
