S&P downgrades Capmark

Standard & Poor's said it lowered its ratings on Capmark Financial Group Inc., including lowering the local-currency long-term corporate credit rating to CC from B- and its $1.2 billion 5 7/8% notes due 2012 to CC.

The CreditWatch listing of the ratings was revised to negative from developing, where it was placed on April 24.

The downgrade follows Capmark's announcement that it lost $1.6 billion in the second quarter of 2009 and that it has entered into an asset-put agreement that gives it the right to sell its North American servicing and mortgage-banking businesses. The agency said that by selling its servicing and originations businesses, the firm should be able to preserve their value, but the consideration received in the sale will not enable Capmark to meet its debt obligations.

S&P expects Capmark either to enter Chapter 11 bankruptcy proceedings or to negotiate a distressed exchange outside of bankruptcy, which most likely would affect most of its debt.

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