A unit tied to Warren Buffet’s Berkshire Hathaway Inc. is in a deal that could make it the third biggest U.S. servicer of commercial mortgages.
The transaction was announced today by struggling Capmark Financial Group Inc.
The deal was struck with Berkadia III LLC — a newly formed venture between Berkshire Hathaway and Leucadia National Corp.
According to the news release, Capmark has agreed to an “asset put agreement” that gives it the right to sell its mortgage banking and servicing operations in North America for $490 million. Also included in a potential sale would be all assets tied to the mortgage business.
Subsidiary Capmark Finance Inc. was ranked as the third biggest commercial mortgage servicer in the second quarter by the Mortgage Bankers Association.
In April, Capmark warned about its ability to continue as a going concern.
Today’s statement indicated that a non-bankruptcy sale would include a $375 million cash payment, a $40 million holdback to cover indemnity claims and a $75 million note that would be reduced for losses in the Fannie Mae DUSÂ portfolio. But a bankruptcy sale would result in a $415 million cash payment.
“If Capmark is in a chapter 11 proceeding, exercise of the put option would be incorporated into a Bankruptcy Code section 363 sale process in which Capmark would seek court authorization to exercise the put option and close on the sale,” the Horsham, Pa.-based firm stated. “In a section 363 sale process, the agreement would serve as a baseline or floor bid price for the mortgage business.”
The deal allows Capmark to pursue alternative transactions for the sale of its mortgage business. If it doesn’t file bankruptcy, an automatic 60-day extension will apply to its ability to sell the mortgage business under the put option.
Capmark reported today a $1.6 billion second-quarter loss and a $1.1 billion stockholder deficit.
