CIT Group (CIT), a commercial lender that provides financing to small and medium businesses, refinanced $3bn of its first lien debt and prepaid some $1bn balance of the debt with corporate cash.

The company said it has now repaid $4.5bn — or 60% — of its original first lien debt and has refinanced the balance at a lower cost and with more flexible terms.

"Our success in quickly repaying and refinancing our first lien debt will further reduce our funding costs as we focus on providing much needed financing to small business and middle market companies," said Chairman and CEO John Thain.

The new $3bn of first lien debt issued under the amended credit facility matures in August 2015 and carries an interest rate of LIBOR plus 4.5%, with a 1.75% LIBOR floor.

Banc of America Securities (BAC) and Morgan Stanley Senior Funding (MS) served as joint lead arrangers and joint bookrunners on the refinancing transaction. BofA will continue to serve as administrative agent and collateral agent under the first lien credit facility.

CIT has seen net income increase on recent efforts to pay down debt. During Q210, the company said it focused on cleaning its balance sheet, reducing total assets by $3.1bn to $54.9bn. Asset sales, net portfolio collections and $800m of new financings enabled CIT to pay down $3bn of its debt.

The effort to de-leverage and pay down debt arrives after the company in late 2009 sought bankruptcy restructuring on the heels of several private capital infusions. CIT in October 2009 expanded an existing $3bn senior secured credit facility with a $4.5bn private capital infusion from a diverse group of lenders.

Write to Diana Golobay.

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