The title should read CIT may will face bankruptcy IF they cannot finish debt swap, may face bankruptcy after debt swap.
Struggling lender CIT Group Inc. warned in a regulatory filing Monday that it might still have to file for bankruptcy protection even if it completes a revised debt restructuring plan.
The New York-based lender to small and mid-sized businesses is trying to cut its near-term debt burden by $5.7 billion. On Friday, it sweetened an exchange offer to current bondholders as it tries to ensure the offer’s success.
The revised exchange offer gives bond holders a better interest rate and shorter maturities on the new debt. It also opens up the exchange to investors holding bonds that mature after 2018.
The revised exchange offer would give the government — which has already provided CIT Group $2.3 billion in aid — a bigger stake in the lender.
At the same time as it tries to swap current debt, CIT Group is asking bondholders to approve a prepackaged reorganization plan should it need to file for bankruptcy protection.
CIT Group is basically telling bondholders that bankruptcy is coming, regardless of what happens in the debt swap at it stands today; however, there was an interesting twist in the CIT story – Carl Icahn offered CIT a $6 billion dollar loan.
In a letter to CIT’s board on Monday, Icahn said the cash-strapped commercial lender is offering certain large bondholders the opportunity to purchase $6 billion in secured loans well below their fair market value.
The billionaire investor, who has made himself a champion of corporate governance, said the offer to large creditors comes at the expense of thousands of smaller bondholders.
Frankly, while Icahn knows how to make a buck, he tends to leave a path of destruction in is way. Just look at this involvement in Blockbuster, XO Communications, Motorola, and Lear.
Related posts:
- CIT debt swap struggles, bankruptcy looms
- CIT Group unable to make bondholders happy, try to "sweeten" terms of restructuring plan.
- Credit Rating agency, Egan-Jones, Urges Rejection of Icahn backed $6B loan for CIT Group
- Icahn attempts to get small CIT bondholders on his side
- CIT, unable to complete debt exchange, sweetens terms again – and extends