Capmark Financial on the Ropes

Capmark Financial Group is heading towards default, as the troubled lender weighs whether to file for bankruptcy after posting a $1.6 billion loss for the second quarter.

It’s a steep fall from grace for Capmark, who originated more Freddie Mac and FHA debt than any other lender last year and has consistently been one of the industry’s most prolific financiers since spinning off from GMAC Commercial Finance in 2006.

The firm has been bleeding staff and shutting offices this year, as it struggled to pay its corporate debt, which totaled about $1.5 billion. “When they went private through the spin-off from GMAC, they took on quite a bit of debt,” says Chris Wolfe, managing director of Fitch Ratings, which, along with Moody’s, downgraded Capmark earlier this month. “And they essentially violated a covenant at the end of last year. The writing was on the wall at that point.”

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