Fitch Ratings has downgraded the long-term Issuer Default Ratings (IDR) of Capmark Financial Group to C from B-, and Capmark Bank to CC from B-.
An IDR of C indicates that default of some kind appears imminent or inevitable.
Fitch's actions follow Capmark's announcement of a $1.6 billion second-quarter net loss, resulting in a $1.1 billion stockholder's deficit and its agreement to enter into an asset put agreement with Berkadia III LLC, an entity owned by Leucadia National Corp. and Warren Buffett's Berkshire Hathaway Inc.
The net loss is primarily due to continued deteriorating conditions in the commercial real estate market, impacting Capmark's loan portfolio; downward pressure on fair values, resulting in losses on its equity and real estate investments; increased provision expense; and an impairment charge on mortgage servicing rights and intangible assets.
Fitch's downgrade of Capmark Bank follows the announcement that the bank has received notification from the Federal Deposit Insurance Corp. that it intends to issue an administrative order, which will impose certain requirements and restrictions on Capmark Bank.
Although the bank continues to report regulatory capital levels in excess of "well capitalized," the extent of further losses on its loan portfolio could impair current capital, Fitch says.
SOURCE: Fitch Ratings