Capmark Financial Group Inc. Announces 2013 Results

  Capmark Financial Group Inc. Announces 2013 Results

Business Wire

HORSHAM, Pa. -- March 28, 2014

Capmark Financial Group Inc. (the “Company”) today issued its Report as of and
for the years ended December 31, 2013 and December 31, 2012. The Company
reported net income of $91.7 million for the year ended December 31, 2013 and
had consolidated total assets of $681.1 million, consolidated total
liabilities of $273.8 million, and stockholders’ equity of $373.6 million as
of December 31, 2013.

Highlights for 2013 were:

  *Total cash received from asset collections and revenue was $718 million.
    Included in the total cash received, the Company realized total proceeds
    of $597 million from the monetization of loan and REO assets, $36 million
    from investment securities and $66 million of distributions from real
    estate equity and debt funds.
  *The Company achieved net consolidated income of $92 million primarily as a
    result of net gains on loans, investments and real estate of $106 million
    and interest income of $30 million partially offset by $52 million of
    noninterest expense. The net gains included a $41 million realized gain on
    interests in collateralized debt obligations that were redeemed or sold.
  *The Company repaid all outstanding deposits at Capmark Bank, which caused
    its deposit insurance to terminate as of December 31, 2013, after which it
    was no longer a regulated bank. The shareholder’s equity of Capmark Bank
    was $75.9 million as of December 31, 2013. On January 1, 2014, the
    articles of organization of Capmark Bank were amended to change its name
    to Capmark Utah Inc., which continues to be a wholly-owned subsidiary of
    CFGI. Capmark Utah Inc. no longer has employees or an independent board of
    directors.
  *The Company made aggregate distributions to stockholders of $1.05 billion,
    or $10.50 per share, in 2013 and ended the year with $374 million of
    stockholders’ equity. Aggregate distributions to stockholders since
    emergence from bankruptcy, including those in 2013, have been $25.00 per
    share.
  *The Company paid an additional $74 million to prepetition creditors,
    including $23 million under the settlement agreement with the Japanese
    lenders, $7 million under the settlement agreement with creditors of
    Crystal Ball Holdings of Bermuda Limited and $44 million from the disputed
    claims reserve. The settlement agreements and the Company’s obligations
    thereunder were terminated.

On March 5, 2014, the Company entered into an agreement (the “Investment
Agreement”) with Centerbridge Capital Partners II, L.P. and certain of its
affiliates (“Centerbridge”) for a strategic investment in the Company by
Centerbridge, subject to certain terms and conditions. The closing under the
Investment Agreement is subject to certain conditions, including approval by
the Company’s stockholders of an amendment and restatement of the Company’s
existing articles of incorporation required for Centerbridge to make its
investments.

Consolidated Balance Sheet

The Company had consolidated total assets of $681.1 million and $2.9 billion
as of December 31, 2013 and 2012, respectively, primarily comprised of a
portfolio of loans, real estate, real estate-related assets and cash and cash
equivalents. Capmark Bank had assets of $83.0 million and $1.4 billion as of
the same dates. Assets totaling $135.2 million and $253.5 million were
associated with discontinued operations as of December 31, 2013 and 2012,
respectively.

The Company had consolidated total liabilities of $273.8 million and $1.5
billion as of December 31, 2013 and 2012, respectively. The Company had
liabilities of $77.4 million and $114.7 million associated with discontinued
operations as of December 31, 2013 and 2012, respectively.

Total stockholders’ equity was $373.6 million at December 31, 2013 compared to
$1.3 billion at December 31, 2012. The decrease is due primarily to the $1.05
billion of cash distributions to holders of the Company’s common stock.

Consolidated Results of Operations

The Company had income from continuing operations before income taxes of $99.0
million in the year ended December 31, 2013, primarily due to $127.7 million
of noninterest income and $30.0 million of interest income partially offset by
$52.4 million of noninterest expense and $6.3 million of interest expense.
Noninterest income of $127.7 million primarily included $41.5 million of
realized gains on the dispositions of real estate investments, $40.6 million
of realized gains on the redemption and sale of interests in collateralized
debt obligations, $23.7 million of realized gains on full or partial
dispositions of loans held for sale and $21.0 million due primarily to
unrealized gains on real estate equity investment funds and joint ventures.
Interest income in the year ended December 31, 2013 included the recognition
of $5.5 million of previously deferred interest on loans held for sale. The
$52.4 million of noninterest expense included $25.9 million of compensation
and benefits costs and $19.6 million of professional fees. The $6.3 million of
interest expense primarily included $20.9 million of contractual interest
expense from deposit liabilities at Capmark Bank offset by $17.4 million from
the accretion of the fresh start accounting premium for the deposit
liabilities.

Liquidity

As of December 31, 2013, the Company’s continuing operations had $138.4
million in total cash and cash equivalents (including restricted cash). The
following table summarizes the cash, cash equivalents and restricted cash from
continuing operations (in thousands):

                                                        
Cash, Cash Equivalents and             December 31, 2013     December 31, 2012
Restricted Cash
Non-Capmark Bank:
Cash and cash equivalents              $     99,086          $    182,726
Restricted cash                              11,861               75,219
Capmark Bank cash and cash                  27,449              1,296,156
equivalents
Total cash, cash equivalents and
restricted cash attributable to        $     138,396         $    1,554,101
continuing operations
                                                             

The Company’s primary sources of liquidity from the existing assets are
expected to be (1)distributions received from equity investments, (2)
proceeds from the resolution of loans, including par payoffs and discounted
payoffs received in connection with loan workout efforts and (3) sales of
other assets in its portfolio. The Company expects to generate sufficient
liquidity from the existing assets to meet its needs for cash in its
operations over the next 12 months, including paying its operating expenses.

The following table summarizes the components of restricted cash from
continuing operations (in thousands):

                                                        
Restricted Cash                        December 31, 2013     December 31, 2012
Distribution escrow                    $      9,480          $      7,462
Bankruptcy disputed
administrative, priority and                  501                   8,865
convenience class claims escrow
Cash from consolidated variable               —                     49,663
interest entities
Other                                        1,880                9,229
Restricted cash from continuing        $      11,861         $      75,219
operations
                                                                    

In 2013, the Company paid cash distributions to the holders of the Company’s
common stock as follows:

                                         
                                              Distribution
Record Date            Distribution Paid
                                              Amount Per Share
March 15, 2013         March 22, 2013         $4.50
June 17, 2013          June 21, 2013          2.50
September 23, 2013     September 27, 2013     1.65
December 27, 2013      December 30, 2013      1.85
                                              

The Company does not anticipate making additional distributions to
shareholders in the near term. The terms of the Investment Agreement with
Centerbridge contain certain prohibitions on future distributions by the
Company and certain of its subsidiaries. If the Investment Agreement with
Centerbridge does not close, the Company will evaluate how to utilize its
cash, including whether to make distributions to stockholders.

Supplemental Financial Information

The Company’s Report as of and for the years ended December 31, 2013 and
December 31, 2012 and related supplemental financial information may be found
on the Company’s website (www.capmark.com) under the heading “Financial
Reporting.”

Investor Conference Call

The Company will host an investor call to be broadcast live over the internet
on April 1, 2014 at 2:00 p.m. Eastern Time to discuss, among other items, the
Report as of and for the years ended December 31, 2013 and December 31, 2012.

To listen to the investor call, please go to www.capmark.com under the heading
“Investor Relations” at least fifteen minutes prior to the scheduled start
time to download and install any necessary audio software. For those who are
unable to listen to the live broadcast, an archived replay will be available
on the website for a period of time. Investors who have questions for the
Company’s management can participate in the conference call by dialing the
following:

  *Toll Free: 877-254-2825
  *Conference ID #20518362

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements.
These statements are based on management’s current expectations and beliefs
but are subject to a number of factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. Such forward-looking statements are made only as
of the date of this release. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company’s expectations with regard thereto or changes in events, conditions,
or circumstances on which any such statement is based.

About Capmark®:

Capmark is a real estate finance company focused on the management of its
commercial real estate-related assets and businesses with a view to maximizing
their value. Capmark is headquartered in Horsham, Pennsylvania and operates
principally in North America. For more information, visit www.capmark.com


CAPMARK FINANCIAL GROUP INC.
Consolidated Balance Sheet
(in thousands, except share amounts)


                                     December 31, 2013   December 31, 2012
Assets
Cash and cash equivalents              $     126,535         $   1,478,882
Restricted cash (1)                          11,861              75,219
Accounts and other receivables (1)           61,019              51,496
Investment securities available              4,974               4,611
for sale
Loans held for sale (1)                      156,870             591,814
Real estate investments (1)                  —                   154,112
Equity investments                           177,534             248,350
Other assets (1)                             7,172               13,048
Assets of discontinued operations           135,177            253,518    
(1)
Total assets                           $     681,142         $   2,871,050  
Liabilities and Equity
Liabilities:
Secured and other borrowings (1)             130,449             222,062
Deposit liabilities                          —                   1,018,601
Other liabilities (1)                        65,922              127,457
Liabilities of discontinued                 77,438             114,719    
operations (1)
Total liabilities                           273,809            1,482,839  
Commitments and Contingent
Liabilities
Equity:
Common stock, $.001 par value;
shares authorized — 110,000,000;
shares issued and outstanding —              100                 100
100,182,419 at December 31, 2013
and 100,242,722 at December 31,
2012
Capital paid in excess of par                189,820             1,240,834
value
Retained earnings                            182,015             90,313
Accumulated other comprehensive             1,627              (4,885     )
income (loss), net of tax
Total Capmark Financial Group Inc.           373,562             1,326,362
stockholders’ equity
Noncontrolling interests                    33,771             61,849     
Total equity                                407,333            1,388,211  
Total liabilities and equity           $     681,142         $   2,871,050  

____________________
       The following table presents assets of consolidated variable interest
       entities (“VIEs”) included in each balance sheet line item that can be
       used only to settle the obligations of the consolidated VIE and
(1)   liabilities of the consolidated VIE included in each balance sheet line
       item for which creditors or other interest holders do not have recourse
       to the general credit of Capmark Financial Group Inc. and its
       subsidiaries.
       

                                                                 
               December     December                    December    December
               31,          31,                         31,         31,

               2013         2012                        2013        2012
Assets                                  Liabilities
Restricted                              Secured and
cash           $  —         $  49,663   other           $  —        $  4,903
                                        borrowings
Accounts and                            Other
other             —            1,055    liabilities        —           2,011
receivables
Loans held for                          Liabilities of
sale              —            181,794  discontinued      7,929      13,580
                                        operations
Real estate       —            22,225   Total           $  7,929    $  20,494
investments                             liabilities
Other assets      —            1,482
Assets of
discontinued     41,685      65,606
operations
Total assets   $  41,685    $  321,825
                                                                    


CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Comprehensive Income
(in thousands, except per share data)


                                     Year ended          Year ended
                                       December 31, 2013     December 31, 2012
Net Interest Income
Interest income                        $   29,999            $   108,985
Interest expense                          6,286               48,675    
Net interest income                       23,713              60,310    
Noninterest Income
Net gains on loans                         26,290                179,019
Net gains (losses) on investments          79,453                (10,733   )
and real estate
Other losses, net                          (5,511    )           (12,226   )
Equity in income of joint ventures         24,260                25,452
and partnerships
Fee revenue                                341                   3,527
Net real estate investment and            2,899               (333      )
other income
Total noninterest income                  127,732             184,706   
Net revenue                               151,445             245,016   
Noninterest Expense
Compensation and benefits                  25,943                63,580
Professional fees                          19,624                32,034
Occupancy and equipment                    2,251                 9,498
Other expenses                            4,578               27,599    
Total noninterest expense                 52,396              132,711   
Income from continuing operations          99,049                112,305
before income tax benefit
Income tax benefit                        (851      )          (1,700    )
Income from continuing operations          99,900                114,005
after income tax benefit
Loss from discontinued operations,        (22,630   )          (44,329   )
net of tax
Net income                                 77,270                69,676
Plus: Net loss attributable to            14,432              52,288    
noncontrolling interests
Net income attributable to Capmark     $   91,702           $   121,964   
Financial Group Inc.
Other comprehensive income (loss)
Net change in unrealized gains and         (1,923    )           2,300
losses on investment securities
Net foreign currency translation          8,435               (5,568    )
Other comprehensive income (loss)         6,512               (3,268    )
Comprehensive income attributable      $   98,214           $   118,696   
to Capmark Financial Group Inc.
Basic and diluted net income per       $   1.15              $   1.67
share - continuing operations
Basic and diluted net income per
share attributable to Capmark             0.92                1.22      
Financial Group Inc.
Basic weighted average shares              99,728                99,607
outstanding
Diluted weighted average shares            99,761                99,734
outstanding
                                                                           


CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands, except number of shares)


                                     Year ended          Year ended
                                       December 31, 2013     December 31, 2012
Common Stock
Number of shares outstanding at           100,242,722           100,052,475
beginning of period
Additional shares issued                  —                     243,767
Treasury shares retired                  (60,303      )       (53,520      )
Number of shares outstanding at          100,182,419         100,242,722  
end of period
Common Stock
Balance at beginning of period         $  100                $  100
Additional shares issued (retired)       —                   —            
Balance at end of period                 100                 100          
Capital Paid in Excess of Par
Value
Balance at beginning of period            1,240,834             2,692,602
Additional shares issued                  —                     —
Stockholder distributions                 (1,052,548   )        (1,454,296   )
Treasury shares retired                   (267         )        (648         )
Stock-based compensation                 1,801               3,176        
Balance at end of period                 189,820             1,240,834    
Retained Earnings (Accumulated
Deficit)
Balance at beginning of period            90,313                (31,651      )
Net income attributable to Capmark       91,702              121,964      
Financial Group Inc.
Balance at end of period                 182,015             90,313       
Accumulated Other Comprehensive
Income (Loss), net of tax
Balance at beginning of period            (4,885       )        (1,617       )
Other comprehensive income (loss)        6,512               (3,268       )
Balance at end of period                 1,627               (4,885       )
Total Capmark Financial Group Inc.       373,562             1,326,362    
Stockholders’ Equity
Noncontrolling Interests
Balance at beginning of period            61,849                178,960
Net loss attributable to                  (14,432      )        (52,288      )
noncontrolling interests
Other (includes impact of sale of        (13,646      )       (64,823      )
discontinued operations assets)
Balance at end of period                 33,771              61,849       
Total Equity                           $  407,333           $  1,388,211    
                                                                             


CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows
(in thousands)


                                     Year ended          Year ended
                                       December 31, 2013     December 31, 2012
Operating Activities of Continuing
Operations
Net income                             $  77,270             $  69,676
Net loss from discontinued               (22,630     )        (44,329     )
operations
Net income from continuing                99,900                114,005
operations
Adjustments to reconcile net
income from continuing operations
to net cash provided by operating
activities of continuing
operations:
Net gains                                 (100,232    )         (156,060    )
Net accretion of fresh start              (17,395     )         (65,242     )
accounting adjustments
Equity in net gains of investees          (20,454     )         (22,970     )
and cash return on investment
Stock-based compensation expense          1,801                 3,380
Other, net                                1,540                 9,430
Net change in assets and
liabilities which provided (used)
cash:
Accounts and other receivables            (1,951      )         91,306
Other assets                              5,344                 90,493
Other liabilities                         (58,090     )         (108,017    )
Current taxes payable                     (19         )         111
Proceeds from sales of/payments          455,407             3,075,582   
from loans held for sale
Net cash provided by operating
activities of continuing                 365,851             3,032,018   
operations
Investing Activities of Continuing
Operations
Net decrease in restricted cash           63,358                54,045
Proceeds from sales of investment
securities classified as available        46,541                18,916
for sale
Repayments of investment
securities classified as available        176                   570,657
for sale
Purchases of investment securities        (11,027     )         —
classified as available for sale
Proceeds from sales of real estate        195,575               281,577
investments
Proceeds from sales of/capital
distributions from equity                 88,829                101,463
investments
Other investing activities, net          1,782               (1,689      )
Net cash provided by investing
activities of continuing                 385,234             1,024,969   
operations
Financing Activities of Continuing
Operations
Repayments of debt                        —                     (738,959    )
Repayments of secured and other           (91,613     )         (427,810    )
borrowings
Transfer of deposit liabilities           —                     (874,026    )
Repayment of deposit liabilities          (1,001,206  )         (1,909,451  )
Distributions to stockholders             (1,052,548  )         (1,454,296  )
Other financing activities, net          (9,955      )        2,348       
Net cash used in financing
activities of continuing                 (2,155,322  )        (5,402,194  )
operations
Effect of Foreign Exchange Rates         (1,024      )        (89         )
on Cash
Discontinued Operations
Net cash used in operating
activities of discontinued                (6,757      )         (18,192     )
operations
Net cash (used in) provided by
investing activities of                   (7,496      )         259,613
discontinued operations
Net cash used in financing
activities of discontinued               (22,340     )        (65,016     )
operations
Net cash (used in) provided by           (36,593     )        176,405     
discontinued operations
Net Decrease in Cash and Cash             (1,441,854  )         (1,168,891  )
Equivalents
Cash and Cash Equivalents,               1,568,920           2,737,811   
Beginning of Period(1)(2)
Cash and Cash Equivalents, End of      $  127,066           $  1,568,920   
Period(2)(3)
                                                            
Supplemental Disclosures of Cash
Flow Information:
Income taxes refunded, net             $  877                $  11,248
Interest paid                             34,849                143,276
Non-cash Investing and Financing
Activities:
Transfer of loans held for sale to        —                     20,309
real estate
Transfer of real estate to loans          —                     14,549
held for sale

____________________
Notes:
    
      Cash and cash equivalents exclude restricted cash of $232.7 million from
(1)   continuing and discontinued operations and include non-restricted cash
      of discontinued operations of $4.4 million, respectively as of December
      31, 2011.
      
      Cash and cash equivalents exclude restricted cash of $150.4 million from
(2)   continuing and discontinued operations and include non-restricted cash
      of discontinued operations of $90.0 million, respectively as of December
      31, 2012.
      
      Cash and cash equivalents exclude restricted cash of $93.9 million from
(3)   continuing and discontinued operations and include non-restricted cash
      of discontinued operations of $0.5 million, respectively as of December
      31, 2013.
      

Contact:

Capmark Financial Group Inc.
Thomas L. Fairfield, 215-328-1555
 
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