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Thursday, March 28, 2024

Capmark It Zero!

Courtesy of Marla Singer

Back in September, Capmark Financial Group, Inc., (100% owner of Capmark Bank) spiked Capmark Bank’s capital with a $600 million dollar transfer of $490 some million in cash and $100 some million in “servicing advances.”  Just to keep everyone up to speed, in June of this year, Capmark Bank reported total assets of $11.12 billion and outstanding deposits of $8.39 billion.  No small fish, Capmark.  Just a few days after the hot cash injection, on October 2 to be precise, Capmark Financial consented to the entry of “Cease and Desist” orders effective immediately and imposing an 8% Tier 1 leverage ratio requirement on Capmark Bank along with a “Total Risk Based Capital” ratio of 10%.  The firm was also required to issue capital plans to the FDIC and Utah authorities within 45 days.  At the time, Capmark Financial Group, Inc. stated:

The Company does not expect the Orders to have a material impact on its existing lending commitments and deposits or its ability to conduct trust services and intends to continue to serve its customers.

Capmark had apparently been fighting for its life for some time:

In December 2008, CFGI applied to the Board of Governors of the Federal Reserve System to become a bank holding company and financial holding company.  After communications with the staff of the Federal Reserve regarding qualification requirements and in light of operating results and other priorities, CFGI withdrew its application on February 26, 2009.

Obviously, things turned south quickly:

Following months of discussions and negotiations with these creditor constituencies and their advisors, the Debtors could not come to an agreement for an out-of-court, pre-packaged or pre-arranged restructuring prior to the Commencement Date that would be amenable to all parties.

Damn creditors.  Always money, money, money with those bloodsuckers.  If only there were some way we could stick it to those leaches once and for all.  Oh, wait!  What about:

I am advised by counsel that, as of the Commencement Date, pursuant to section 365(o) of the Bankruptcy Code, CFGI is deemed to have assumed its commitments to the FDIC to maintain the capital of Capmark Bank and any damages that may arise from any subsequent breach of such obligations are entitled to priority under section 507 of the Bankruptcy Code.

Questions:

  1. Given that Capmark Financial Group, Inc. has now filed for bankruptcy (perhaps after 24 days of trying writing “capital plans” it just didn’t seem worth it anymore) how is this inter-company transfer not a fraudulent conveyance?
  2. Is it normal for entities to move funds in this way days before the issuance of an FDIC “Cease and Desist”?  (We are honestly asking here.  We really have no idea).
  3. Are Capmark Financial Group’s creditors likely to be amused?
  4. Could it be that Capmark Financial is to continue to fund Capmark Bank through bankruptcy?  How typical is this?  (We, again, really have no idea- surely Zero Hedge readers have seen this before somewhere?)  Given this, will Capmark Financial’s creditors be coming to Sheila Bair’s book signing party?
  5. Did we miss a floor vote somewhere that transformed “prompt, corrective action” to “delayed, injurious procrastination”?
Attachment Size
Capmark Sale Of Mtg Servicing Business To Berkshire and Leucadia.pdf 503.41 KB
Capmark affidavit.pdf 249.98 KB
600 from cap fin to cap bank in utah-2.pdf 182.95 KB
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