Capmark Financial Group Inc., the lender taken over by a group including KKR & Co. and Goldman Sachs Group Inc., reached a settlement with senior lenders that may avoid litigation over a $1.5 billion loan, three people familiar with the accord said.
The secured creditors agreed to a 9 percent discount on $1.5 billion of claims, or $135 million of principal, in exchange for getting paid by the end of the year, said the people, who asked not to be identified because the talks aren’t public. The settlement, which may be filed as soon as today, will require approval by the bankruptcy court.
The accord may make it easier for Capmark to end its bankruptcy case this year by removing the threat of litigation over the loan. Capmark, the former GMAC LLC commercial mortgage unit, took out the loan five months before filing for bankruptcy in October.
Capmark and the committee representing lower-ranking, unsecured creditors are scheduled to battle over the legitimacy of the loan in U.S. Bankruptcy Court in Wilmington, Delaware, on Sept. 15. The lawyer for the committee of unsecured creditors said he hasn’t seen the settlement, and that he intends to go forward with his challenge.
“We find it interesting that any effort to settle comes after we sought to end payments to the term lenders and sought to file a lawsuit against the term lenders,” attorney Thomas Moers Mayer said in an interview.
Unsecured creditors claim the loan has “little to no value” and was wrongly arranged by company insiders to ensure that lenders got paid before other creditors. The committee needs permission from U.S. Bankruptcy Judge Christopher Sontchi to sue Citigroup Inc., the loan’s administrative agent.
Should Sontchi approve a settlement between Capmark and the lenders, the committee would lose the right to challenge the $1.5 billion loan. Messages left for Capmark spokesman Thomas Fairfield weren’t returned and Citigroup spokeswoman Danielle Romero-Apsilos declined to comment.
Capmark, based in Horsham, Pennsylvania, filed for bankruptcy on Oct. 25, blaming falling property values and a drop in lending.
James Sprayregen and Edward Sassower, partners at law firm Kirkland & Ellis LLP, are representing the ad hoc committee of secured lenders. Martin Bienenstock, a partner at Dewey & LeBoeuf LLP in New York, is representing Capmark.
KKR, Goldman Sachs, Dune Capital Management LP and Five Mile Capital Partners LLC bought 78 percent of Capmark, then called GMAC Commercial Mortgage, in 2006 for $1.5 billion in cash and the repayment of $7.3 billion of debt, before General Motors Corp. sold a 51 percent stake in the rest of its finance business, GMAC LLC.
The case is In re Capmark Financial Group Inc., 09-13684, U.S. Bankruptcy Court, District of Delaware (Wilmington).