Capmark May Sell Mortgage Unit

Capmark May Sell Mortgage Unit HORSHAM, PA - Capmark Financial Group Inc. and its wholly-owned subsidiaries, Capmark Finance Inc. and Capmark Capital Inc, entered into an Asset Put Agreement with Berkadia III, LLC. The Purchaser is a newly formed entity owned by Berkshire Hathaway Inc. and Leucadia National Corporation.

The Agreement provides for a put option whereby the Sellers have the right to sell to the Purchaser the Sellers' North American servicing and mortgage banking businesses and all assets primarily used in, or primarily related to, the Mortgage Business. The Sellers paid the Purchaser $40.0 million in cash for the Put Option. If the Put Option is exercised by the Sellers, then upon the terms and subject to the conditions provided for in the Agreement, the Sellers will transfer to the Purchaser the Acquired Assets for an aggregate purchase price of $490.0 million, subject to various closing adjustments, including an upward adjustment for servicing advances and warehoused loans.

If the sale of the Mortgage Business occurs outside of a bankruptcy proceeding, the purchase price will consist of a $375.0 million payment in cash at the closing, a $40.0 million holdback retained by the Purchaser to cover indemnity claims, and a $75.0 million note payable from the Purchaser that is subject to reduction for losses in Capmark's Fannie Mae DUS portfolio (the "Note"). If the sale of the Mortgage Business occurs in a bankruptcy proceeding under section 363 of the Bankruptcy Code, the purchase price will consist of a $415.0 million payment in cash at the closing and the Note.

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. In a section 363 sale process, the Agreement would serve as a baseline or floor bid price for the Mortgage Business. Under the terms of the Agreement, Capmark has the option to pursue alternative transactions for the sale of the Mortgage Business.

The Put Option expires if not exercised by the Sellers within sixty days of the execution of the Agreement, unless the Sellers file for bankruptcy prior to the sixtieth day, in which case Sellers have an additional sixty days from the date of any such filing to exercise the Put Option.

Capmark is a commercial real estate finance company that operates three core business lines: lending and mortgage banking, investments and funds management, and servicing.
Source: Capmark Financial Group

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