CIT BondHolders to Fund $3 Billion
Looks like a temporary credit line deal may be imminent:
CIT Group Inc., the 101-year-old commercial finance company seeking to avoid collapse, is considering an offer from some of its largest bondholders to provide $3 billion in bridge financing, according to two people briefed on the firm’s deliberations.
The lender’s board was scheduled to meet today to discuss the offer, which would give the New York-based company a chance to restructure its debt outside of bankruptcy, said one of the people, who declined to be identified because the talks are confidential.
CIT needs time to strike deals with bondholders to reduce debt after the U.S. wouldn’t give the firm a second bailout. CIT, which has reported $3 billion of losses in the last eight quarters, received $2.33 billion in funds from the U.S. Treasury in December and hasn’t been given access to the Federal Deposit Insurance Corp.’s debt-guarantee program.
This will provide CIT Group time to do a debt for equity swap.
Sounds like good money after bad . . .
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Sources:
CIT Group Said to Weigh $3 Billion Financing Offer
Pierre Paulden and Linda Shen
Bloomberg, July 19 , 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=acSU34bPB0Pw
Bondholders Plan CIT Rescue
JEFFREY MCCRACKEN and SERENA NG
WSJ, JULY 20, 2009
http://online.wsj.com/article/SB124804619825363655.html
CIT Is Near Deal for $3 Billion Loan to Avert Bankruptcy
MICHAEL J. de la MERCED
NYT, July 19, 2009
http://www.nytimes.com/2009/07/20/business/20bank.html
July 19th, 2009 at 10:21 pm
Good for another 20 points on the S&P 500! The battle bots who are about to die salute you!
July 19th, 2009 at 10:33 pm
I thought that this was announced on Friday that JPMorgan and Goldman were going to provide a 3 billion bridge
July 19th, 2009 at 10:49 pm
http://www.auctionzip.com/cgi-bin/auctionview.cgi?lid=655652
This link is to an auction being held in Houston, Tx. Take a look at the yrs of the vehicles to be auctioned. Much of it very recent. Things are breaking and they can’t stop it. There are significant amounts 0f mechanized capacity in this country sitting idle and ‘rotting’.
A smart person would be on the phone to Sao Paulo looking to line up a Brazilian partner- Petrobras recently found oil on land. I can hardly believe this came to auction stage. It should be on cargo ships en route to parts unknown by now.
20 Mack Gin Pole Trucks- 2006 to 2008 vintage- wonder who did the leasing deal for that company…
July 19th, 2009 at 10:55 pm
This is definitely throwing good money after bad, but if Pim(p)co were a good trader they were probably buying up a bunch of the super distressed sells last few days knowing that if they tossed a few bones at this problem they could probably trigger a massive rally in all the debt they hold, as the largest debt holder in CIT. This is what some would refer to as a “leverage” play….you sacrifice a few dollars to make money on all the rest of the crap you own. Under this scenario I would expect them (Pimpco) to be selling out their debt positions on any rally over the next few weeks. This move allows them to unwind their exposure at better levels…trying to turn some lemons into lemonade….at least as much as they can do.
They won’t do this again….the next time CIT is on the ropes, they’ll go down for good.
July 20th, 2009 at 12:07 am
Andy T:
The question is: why are they even doing this? CIT is toast. This only prolongs the agony.
July 20th, 2009 at 1:13 am
Calvin Jones….
I’m not sure the exact math involved…but this is what someone postulated on clusterstock blog
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So Bill Gross and pals just ran off with $10 billion+ of CIT Group’s best assets and for $3 billion. This $3 billion loan is secured by $10 billion + of CIT’s best unecumbered assets (according to Reuters), so when the inevitable bankruptcy comes, Bill Gross and pals are going to make a killing.
Meanwhile other shareholders and creditors get totally screwed and get none of the $10B of unencumbered assets.
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Also, the deal might cause a “relief rally” in all the other debt, which may give Pimpco an “out” for their existing underwater crap. Meanwhile the nearly 3bn the USG gave them previously????? What happens to that? Well, it’s only money…..
July 20th, 2009 at 9:57 am
Can we say… “double down”?
July 20th, 2009 at 11:02 am
Andy T hit the nail on the head. I have done financial restructuring as a lawyer for decades. That is how you do it. You loan against all the otherwise unsecured assets, you make sure the loan proceeds go to pay your debt, and, most importanly, you avoid having a debt which is non-performing. Then, one of two things happens: (1) the debtor has time and comes out ok , during which time you have a performing debt (and as Andy says, may be able to sell out for a profit); or (2) the debtor goes belly up, but at a later date and you are fully secured.