Bankruptcy of CRE Lender Hits Big Financial Players

When commercial mortgage giant Capmark Financial filed for bankruptcy protection last week its initial declaration included a page for its 30 largest unsecured creditors with one glaring omission: those creditors were not named.After a bit of digging — and with the assistance of the kind folks at Bankruptcy.com, a tracking service — I was able to obtain a list of Capmark’s largest “unsecured” creditors from the truckload of documents that eventually were dumped in the court record. Topping the list was Citibank, which is hardly in a position to take more losses.But Citi — the administrative agent on what was once a $5.5 billion loan to Capmark — has plenty of company for sure. Deutsche Bank, acting as a trustee, is owed $1.8 billion on bond-related debt with Wilmington Trust owed $500 million.In short, the firms that are owed money by Capmark — formerly known as GMAC Commercial Holding Co. — read like a “Who’s Who” of financial services: JPMorgan Chase, Wachovia, Fannie Mae, Freddie Mac and even Lehman Brothers. (I guess Capmark doesn’t have to worry about Lehman since it’s dead. As for Fannie and Freddie, you never know what Uncle Sam will do.)A few of the creditors I spoke with believe they are in fact “secured” lenders and anticipate getting most of their money back. (We shall see.)Citibank wouldn’t comment for the record but a spokesman there pointed out that just because it serves as agent on the loan that doesn’t mean it’s on the hook for the remaining $4.6 billion. She’s right. But Citi participated out the loan — yet it still holds a large chunk of it. According to an SEC document I dug up its “partners” on the credit include (among others) Credit Suisse, Deutsche Bank, Scotiabanc and Wachovia (now the property of Wells Fargo.)I would guess by now all the lenders have lawyered up and are putting their best attorneys on the case, especially since Capmark lists them as “unsecured” (as in “stand in line with everyone else”) but they believe they are in fact secured.When the $5.5 billion loan was first extended back in 2006 Capmark had new owners, Kohlberg Kravis & Roberts, Goldman Sachs and Five Mile Capital Partners, the latter of which included MBS co-inventor Lewis Ranieri. At the time of the sale, Capmark’s owner, General Motors, was ailing financially and rumors abounded even back then that the automaker might be headed for bankruptcy. (That’s one rumor that proved true.)With GM on the ropes, KKR, Goldman and Five Mile thought they were getting a bargain: for $1.5 billion in cash (while agreeing to repay $7.3 billion in intercompany loans to GMAC) they would gain control of GMAC Commercial (later renamed Capmark), once considered the nation’s premier commercial mortgage banking firm with more than $200 billion in receivables.Well, KKR and its partners got what it wanted. Now they have to deal with the aftermath — as do the bank lenders on the $5.5 billion note. At press time Capmark’s bonds (presumably “secured”) were trading at 22 cents on the dollar, according to Bloomberg. How much the lenders (secured and otherwise) ultimately recoup will depend on the recovery of the U.S. economy and how much commercial space firms will need over the next 24 months. If the recovery stalls their losses will deepen.