Centerbridge Partners has agreed to an investment in Capmark Financial Group, subject to certain terms and conditions. Capital would be used to finance one or more acquisitions. Centerbridge would make an immediate $5 million investment in convertible preferred stock of the company at adjusted book value. Capmark Financial also would issue to Centerbridge five year warrants to acquire 43 million shares of common stock at an exercise price of 110 percent of adjusted book value. Centerbridge also would agree to buy from Capmark up to $100 million in aggregate principal amount of seven year subordinated floating rate PIK notes.
Capmark Financial Group Inc. (“Capmark” or the “Company”) today announced that it has entered into an agreement with affiliates of Centerbridge Partners, L.P. (“Centerbridge”) for a strategic investment in the Company by Centerbridge, subject to certain terms and conditions. Funds made available to the Company by Centerbridge would be used, together with the Company’s own resources, to finance one or more acquisitions whose goal is to enhance value for all shareholders. Centerbridge would also be assisting the Company over a two to three year period in identifying potential acquisition candidates that fit the Company’s strategic objectives.
Under the terms of the investment agreement, Centerbridge would at closing make an immediate investment of $5 million in convertible preferred stock of the Company at adjusted book value. The Company would also issue to Centerbridge five year warrants to acquire 43 million shares of common stock at an exercise price equal to 110% of adjusted book value, with the expectation that the proceeds of exercise would be used together with existing Company cash to fund the equity component of acquisitions that are mutually approved by the Company and Centerbridge. The warrants would not be exercisable unless the Company consummates an acquisition. Centerbridge would further agree, on certain terms and conditions, to purchase from the Company up to $100 million in aggregate principal amount of seven year subordinated floating rate PIK notes, whose proceeds would also be used for acquisition purposes.
In consideration of its investment relationship with the Company, Centerbridge through its preferred stock would also be entitled, from and after closing and subject to certain terms, to elect a director to the Company’s board of directors. Its representation on the board would increase as it made additional investments in the equity of the Company in connection with mutually agreeable acquisitions by the Company.
The investment agreement and related documentation grants various other rights to Centerbridge following closing, including certain rights of participation of Centerbridge in future equity offerings by the Company, certain approval rights regarding the issuance of shares by the Company and other matters, certain information rights and customary registration and similar rights. Centerbridge is entitled to certain capped expense reimbursement, and certain matching rights on other transactions that the Company might enter into for 12 months if the investment agreement is terminated prior to closing.
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 articles of incorporation required for Centerbridge to make its investments.
Gene Davis, Executive Chairman of Capmark, remarked “We are pleased to announce the agreement for a strategic relationship with Centerbridge, which has a well-deserved reputation for identifying and executing upon value enhancing opportunities for investors.”
Matthew Kabaker, Senior Managing Director at Centerbridge, said “We are very excited to partner with Capmark and its management on this transaction. We believe there are numerous ways for Capmark to expand their business and generate additional shareholder value. We are looking forward to providing capital and expertise to help Capmark fully capitalize on these opportunities.”
Houlihan Lokey Capital, Inc. is acting as financial advisor to the Company in connection with the transactions described in this release. Kramer Levin Naftalis & Frankel LLP is counsel to the Company. Simpson Thacher & Bartlett LLP is counsel to Centerbridge.
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 additional information visit the Company’s website at www.capmark.com
Centerbridge Partners, L.P. is a private investment firm with offices in New York and London and has approximately $20 billion in capital under management as of December 2013. The firm focuses on private equity and distressed investments. The firm is dedicated to partnering with world-class management teams across targeted industry sectors to help companies achieve their operating and financial objectives.
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.