CIT's Fate Rests in Hands of Bondholders
CIT Group Inc. submitted a new plan that would wipe out a large chunk of the company’s outstanding debt. But if the company does not secure support for the plan, it may pursue bankruptcy proceedings, according to the company.
According to a company statement, CIT is launching exchange offers for certain unsecured notes. The company is currently trying to drum up support from bondholders for the new plan. If it does not, it may file for bankruptcy protection. But the company'sadvisors to the steering committee said “approximately $10 billion of outstanding unsecured indebtedness have already indicated their intention to participate in the exchange offer or vote for the prepackaged plan of reorganization.”
CIT’s board of directors and steering committee of bondholders approved a capital restructuring plan, which it hopes will improve the company’s liquidity and return it to profitability.
CIT Chairman and Chief Executive Officer Jeffrey M. Peek said both the rescue plan and the pre-packaged reorganization plan will be beneficial to the company.
“Upon completion of either alternative, CIT will be a well-funded bank holding company with a strong capital position and market leading franchises,” he said, in the statement, adding, “We have the liquidity to serve our small business and middle market clients throughout this process.”
CIT is the largest factor to the apparel industry, financing approximately 60 percent of all transactions made between clothing manufacturers and retailers.
Over the years, as factors have consolidated, CIT has become the major player in the factoring game. In July, CIT fell short of funds and turned to the federal government for a loan after already receiving a $2.3 billion federal bailout late last year. But the Obama administration denied the lender’s second request for funds.—Alison A. Nieder
