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August 18, 2009

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CIT's offer to buy back debt notches success

COMMERCIAL lender CIT Group Inc said yesterday its offer to repurchase outstanding debt at a discount - a crucial step to help stave off bankruptcy - was successful.

The embattled New York-based lender offered to buy US$1 billion in debt that was set to mature yesterday. CIT warned that if not enough bondholders were willing to sell the debt back to the firm, it would likely have to file for bankruptcy protection.

The company said nearly 60 percent of the debt was tendered for purchase, barely topping the 58 percent minimum needed to complete the offer. CIT is paying US$875 for every US$1,000 tendered as part of the offer.

CIT will pay off the remaining notes that matured yesterday but were not tendered for purchase as part of the offer.

"The completion of this tender offer is another important milestone as the company continues to make progress on the development and execution of a comprehensive restructuring plan," CIT Group said in a statement.

At the same time that CIT received US$3 billion in emergency funding last month from its largest bondholders, it launched the offer to buy back outstanding debt in an effort to ease a cash crunch that nearly forced it out of business. CIT turned to and received funding from its bondholders only after negotiations for a government-led bailout failed.

Some experts feared that if CIT collapsed it would deal a crippling blow to an economy still bleeding hundreds of thousands of jobs a month despite a nearly US$800 billion federal stimulus program.

CIT could continue to struggle with liquidity issues as more debt is due to mature next year.


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