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October 19, 2009

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CIT Group to change its debt restructuring

CIT Group Inc, a major lender to small and mid-size businesses that has struggled under mounting losses and tight credit availability, has amended its debt restructuring offer to enlist more bondholder support.

The troubled New York-based lender had launched the restructuring effort on October 1 with the hope that it will trim at least US$5.7 billion from its near-term debt. It is also asking bondholders to approve a prepackaged reorganization plan in case it is forced to file for Chapter 11 bankruptcy protection.

Losses mounting

The company said in a statement late on Friday that the debt exchange changes have the backing of its board and a steering committee of bondholders.

CIT Group's losses have been mounting as its borrowing costs have outstripped its income amid the credit crunch. It has received US$2.3 billion in federal bailout money last fall and a US$3 billion emergency loan in July from some of its largest bondholders.

Its customers range from Dunkin' Donuts franchisees to department store operator Dillards Inc. It is also a short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation.

Some economists said the company's collapse could hurt a United States economy struggling to recover from recession.

CIT Group said the amended restructuring plan includes a mechanism to accelerate repayment of new notes and the shortening of maturities by six months for all new notes and junior credit facilities.

It also includes an increased amount of equity offered to subordinated debt holders and notes maturing after 2018 that had not been solicited.

The exchange offers will expire on October 29, except for the additional notes maturing after 2018.

CIT had US$54.09 billion in outstanding long-term borrowings as of June 30, including US$13.85 billion due by June 30, 2010.

"We believe that these amendments will further build bondholder support for our restructuring plan," CIT Group Chairman and CEO Jeffrey Peek said.


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