Gramercy Capital Corp. (NYSE: GKK) announced today the execution of a definitive agreement to transfer the collateral management and sub-special servicing agreements for its three Collateralized Debt Obligations, CDO 2005-1, CDO 2006-1 and CDO 2007-1, to CWCapital Investments LLC (“CWCapital”) for approximately $9.9 million, less adjustments and closing costs.
The Company will retain its equity interests in the three CDOs, which will provide the Company with the potential to recoup additional proceeds over the remaining life of the CDOs based upon resolution of underlying assets within the CDOs. Subject to customary closing conditions, the transfer is expected to close in March 2013.
The Company intends to liquidate its CDO bond portfolio. The Company also expects to receive additional cash proceeds for past CDO servicing advances of approximately $14.0 million when specific assets within the CDOs are liquidated.
The summary of the transaction is as follows:
|Collateral Management Agreements||$9.9 million||45 days|
|CDO Equity||Retained||Liquidation of CDOs|
|CDO Bonds||$32.0 million||30-90 days|
|CDO Advances||$14.0 million||Majority expected within 6-9 months|
The transaction achieves a number of important objectives:
- It maximizes the value of the servicing business through the sale to a large platform that has significant scale;
- It greatly simplifies the going-forward business and significantly reduces the Company’s ongoing MG&A expenses through elimination of CDO related personnel costs and servicing advance requirements;
- It unlocks in excess of $50.0 million in liquidity currently invested in the CDO business; and
- It allows the Company to retain potential future upside in the equity in the three CDOs.