NEW YORK – Commercial real estate company Capmark Financial filed for bankruptcy protection on Sunday, weighed on by declines in the sector and a heavy debt load related to its leveraged buyout.
Capmark, which was created out of the commercial real estate assets of General Motors’ finance arm GMAC in March of 2006, had indicated earlier this year that it might file for bankruptcy.
The move wipes out the private equity investments of Kohlberg Kravis Roberts & Co [KKR.UL], Goldman Sachs Group’s (GS.N) Goldman Sachs Capital Partners and Five Mile Capital, which bought Capmark for $1.5 billion in cash and more than $7 billion in debt.
According to the bankruptcy filing, the group owned 75.4 percent of the company while GMAC, or the General Motors Acceptance Corp, owned 21.3 percent. Employees and directors owned most of the remaining stock. Equity investors are typically wiped out in bankruptcy.
KKR already wrote down its investment in Capmark to zero earlier this year. KKR has had other failed equity investments this year, including its 2005 purchase of doormaker Masonite, which filed for bankruptcy in March and has since emerged from court.
In order to raise cash, the company signed a deal in September to sell its loan servicing and mortgage business to Berkshire Hathaway (BRKa.N) and Leucadia National (LUK.N) for $490 million. That deal can still take place in bankruptcy.
Capmark listed $20.1 billion in assets and $21 billion in liabilities as of June 30, 2009 in the bankruptcy filing, which was made in U.S. Bankruptcy Court in Wilmington, Delaware.
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