Completing a deal that has been more than a year in the making, an investor group comprised of Kohlberg Kravis Roberts, Goldman Sachs Capital Partners and Five Mile Capital has closed an almost $9 billion (€7.5 billion) deal to take over a 78 percent stake in GMAC Commercial Holding Corp., the commercial mortgage division of General Motor’s financing arm GMAC Financial Services. The acquired property has changed its name to Capmark Financial Group as a result of the takeover.
The terms of the transaction have changed somewhat since the deal was first announced last August. The investors are taking over a 78 percent stake as opposed to the initial 60 percent holding that was originally announced. According to a statement, the investors contributed more than $1.5 billion in cash for its position.
The $9 billion enterprise value takes into account roughly $7.3 billion of inter-company loans that were paid back to GMAC at the close of the deal. Also as part of the transaction, Capmark took on a $10.75 billion loan facility to provide a long-term debt funding base.
Capmark’s former parent GMAC continues to hold an approximately 21 percent stake in the business, and has agreed to inject another $250 million in Capmark trust preferred stock.
The sale of Capmark underscores the turmoil taking place in the US auto industry. GM in particular has been hampered by billions of dollars in unfunded healthcare liabilities not to mention weakened demand for its automobiles. The commercial mortgage arm of GMAC, because of this was made expendable, and there has been speculation that GM could ultimately seek to divest a larger chunk of the GMAC unit.
Calyon Securities stock analyst Joseph Amaturo wrote in a research note, “This is not the ultimate sale of GM’s majority stake in GMAC, although we continue to believe that the broader GMAC deal is considerably more likely to occur in the near-term following the completion of this transaction.”
Capmark brought in former GE Capital Corp. chairman and chief executive Dennis Dammerman to lead the company’s board.
While KKR and Goldman are well-known throughout the buyouts space, Five Mile Capital is somewhat newer to the scene. The firm describes itself on its website as an “alternative investment management company” that concentrates “predominately on fixed income and credit products”.
Five Mile is headed by Lewis Ranieri, the Salomon Brothers vet that was made famous in Michael Lewis’s book Liar’s Poker.