CIT Gets Second Private Capital Bailout
CIT Group Inc. (CIT), a commercial lender offering financing to small and medium businesses, this week expanded an existing $3bn senior secured credit facility to obtain $4.5bn in new credit. “We believe this secured financing will serve the best interests of all stakeholders and will allow us to better position CIT for the future,” said chairman and CEO Jeffrey Peek. “This expanded credit facility will allow us to continue to serve our existing small business and middle market customers as we advance our restructuring plan.” The company’s major bondholders agreed back in July to lend it $3bn to continue its lending operations to small- and medium-sized businesses that depend on it to make payroll and meet other operational expenses. The loan facility meant CIT was better positioned to continue extending credit to some commercial businesses while restructuring outside of a possible bankruptcy filing. The new $4.5bn tranche obtained this week, which matures in January 2012, was expected to close Wednesday and will be used to refinance a portion of the company's existing secured indebtedness, which CIT said may come due as a result of restructuring efforts at the company. The new credit infusion, from a diverse group of lenders, comes after CIT turned down an offer from private equity investor Carl Icahn to provide CIT a new $4.5bn term loan. "Although Mr. Icahn and his advisors had been in discussions with the Company for several days and were fully aware of CIT’s deadline, they provided the Company less than one hour to review and accept his commitment letter," CIT said in a statement Wednesday. "Additionally, despite several requests from the Company for information and multiple deadline extensions, the Company has yet to receive a signed credit agreement and evidence of Mr. Icahn’s ability to fund the commitment." Earlier this week, CIT sent out a statement addressing "inaccuracies" in Icahn's open letter to smaller CIT bondholders. CIT said Icahn was trying to convince smaller bondholders to vote against the company's proposed restructuring plan in exchange for his offer. CIT worked with a diverse group of bondholders over months to develop a comprehensive restructuring plan to position CIT for future success. The company said on Tuesday a successful completion of either exchange offers or a reorganization plan would generate significant capital and liquidity. CIT's second bailout comes the same week commercial real estate lender Capmark Financial Group confirmed weekend reports of its Chapter 11 bankruptcy filing as part of a reorganization after posting a $1.6bn second-quarter loss. Write to Diana Golobay.