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Moody's Downgrades Capmark Rating

NEW YORK CITY-In its second rating action on the lender in four months, Moody's cites the possible sale of Capmark's mortgage unit.

By Paul Bubny | Updated on September 08, 2009

NEWYORK CITY-Moody’s on Friday downgraded the senior unsecured ratings of Capmark Financial Group to C from Caa1 following Capmark’s announcement of its potential $490-million sale of its North American servicing and mortgage banking businesses, its announcement of a $1.6-billion loss in the second quarter and its indicating that it could file for a Chapter 11 reorganization. The ratings agency had cut Capmark’s rating to Caa1 last April.

In a release from Moody’s, the agency says a sale of Capmark’s servicing and mortgage banking businesses “would remove key sources of income needed to service and repay unsecured debt obligations, while impairing the value of its franchise and remaining businesses.”

Moody’s says the downgraded rating also stems from “the material deterioration in asset quality, the diminished size of its unencumbered asset portfolio, and the potential for additional required support–possibly in cash and/or assets–to bolster Capmark Bank,” Capmark’s industrial banking unit headquartered in Salt Lake City. “As a result, Moody’s believes that the unsecured lenders and bondholders, either in a default or a restructuring scenario, would experience substantial losses. The C rating reflects the potential loss severity.”

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