CIT cuts $3bn salvation deal
US lending giant CIT Group last night cut an eleventh-hour deal with its key bondholders for $3bn(£1.8bn) in financing that will save the 101-year-old from the jaws of bankruptcy.
CIT, which suffered a liquidity crunch and is straining under its multi-billion dollar debt load, now aims to restructure outside of court.
The firm, which lends to nearly a million small and mid-sized businesses, had been in frantic talks with the bondholder group to hammer out the rescue financing deal before the markets open in the US today.
Investment bank Houlihan Lokey was leading the talks with the bondholders, the largest of which is Pacific Investment Management.
The lender’s problems came to light two years ago, in the wake of chief executive Jeffrey Peek’s decision earlier in the decade to expand its subprime mortgage and student loans business.
In December, CIT gained the status of a bank holding company so that it could draw $2.33bn of taxpayers’ money from the US government’s Troubled Asset Relief Program (Tarp).
And last Wednesday CIT said that bailout talks with the government had fallen apart, heightening the chances it would file for bankruptcy.
CIT has about $40bn of long-term debt, according to independent research firm CreditSights. About $1.1bn of debt is due in August, followed by about $2.5bn by the end of the year.