Capmark Files for Bankruptcy

Updated from Sunday, Oct. 25

HORSHAM, Pa. (TheStreet) -- Commercial real estate lender Capmark Financial Group filed for bankruptcy protection Sunday.

The filing by Capmark was widely expected, as the Horsham, Pa.-based lender acknowledged last month that it was teetering on the edge of bankruptcy.

In its filing in Delaware bankruptcy court, Capmark said its debts totaled $21 billion while assets were $20.1 billion, according to the Associated Press

The company's troubles highlight broader problems in the commercial real estate market. Poorly performing commercial loans are becoming a nettlesome issue for banks, which are already suffering from the meltdown in residential real estate. Capmark is seen as a good gauge of the larger market, as it is among the top servicers of U.S. commercial real estate loans and is the largest servicer of loans in the rest of the world, according to the Mortgage Bankers Association.

The company was once part of General Motors' GMAC lending arm before being taken over by an investor group that includes Kohlberg Kravis Roberts and Goldman Sachs(GS Quote).

Capmark posted a $1.6 billion quarterly loss last month, as it set aside $345.8 million to cover loan losses during the quarter ended June 30. The company had been in talks with lenders and bondholders to restructure its debt so that it could stay in business.

Last month, Capmark acknowledged accepted a rescue deal from a group led by Warren Buffett, the chairman of Berskshire Hathaway(BRK.A Quote). But The Wall Street Journal noted that the deal's terms allow it to be consummated while Capmark is under bankruptcy protection.

"We view this reorganization process as an unfortunate but necessary response to recent unprecedented conditions in financial and commercial real estate markets, which presented a significant challenge for Capmark and similarly situated finance companies," said Capmark President and CEO Jay Levine, in a statement. "By constraining the availability of capital, these difficult market conditions had a negative effect on all our core businesses."