(Updates with more detail, background. Rewrites throughout.)
DOW JONES NEWSWIRES
Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) and
Leucadia National Corp. (LUK) agreed Wednesday to buy Capmark
Financial Group Inc.'s North American mortgage and servicing
operations for about $490 million, a deal suggesting investors are
beginning to see prospects for the U.S. property market.
The deal comes as Horsham, Penn.-based Capmark seeks to
restructure its debt and is looking at options for its business
holdings. In an earnings release, Capmark said it might seek
bankruptcy protection to address its problems and raised questions
about its viability.
"The Company's management believes that...substantial doubt
exists about the Company's ability to continue as a going concern,"
Capmark said in its report for the quarter ended June 30.
Capmark, which also reported a $1.61 billion quarterly loss as
losses on loans, investments and real estate continued to pile up,
runs three main businesses: lending and mortgage banking,
investments and fund management, and servicing. The company
primarily works with commercial real estate, according to its Web
site.
The financial services provider has been under pressure since
March, when it missed a bridge-loan payment that triggered payments
on default-swaps contracts.
The deal comes as evidence the beleagured U.S. real estate
market is starting to turn around mounts. U.S. home prices rose in
the second quarter for the first time in three years, and some
builders, like Hovnanian Enterprises Inc. (HOV), have reported
narrowing losses.
Buffett, Berkshire's chief, is known for being a savvy investor
who looks for deep value, often in areas that are out of favor with
other investors. At the height of the financial crisis last fall,
Buffett invested $5 billion in Goldman Sachs Group Inc. (GS) and
got 10% cumulative preferred shares when few investors would
consider financial companies.
Capmark paid Berkshire and Leucadia $40 million to enter into
the complex agreement. Capmark has the right to sell, or "put," its
assets to the investors for $375 million in cash at the closing if
the sale occurs outside of bankruptcy proceedings. The price would
also include a $40 million holdback retained by the buyers to cover
indemnity claims and a $75 million note that is subject to
adjustments in losses in a Capmark portfolio.
If the sale happens within bankruptcy proceeds, the price will
comprise $415 million in cash and the $75 million note, subject to
court authorization.
-By Jay Miller, Dow Jones Newswires; 212-416-2355;
jay.miller@dowjones.com
-By Andrew Morse, Dow Jones Newswires; 415-439-6402;
andrew.morse@dowjones.com
