CIT Averts Bankruptcy

CIT has averted bankruptcy by succeeding to get just above the requisite minimum of acceptances for its tender offer. The Offer expired at 12:00 midnight, New York City time, at the end of August 14, 2009. CIT is paying $875 for every $1,000 tendered as part of the offer. From the press release:

As of the expiration date, 59.81% of the total Notes outstanding were validly tendered and not withdrawn, an amount in excess of the minimum condition. In accordance with the terms and conditions of the Offer, CIT will accept tendered Notes for payment on August 17, 2009, the settlement date, at a purchase price of $875 per $1,000 principal amount of Notes. CIT will pay amounts due on Notes that have matured but were neither tendered in, nor subject to the Offer in accordance with the terms of those Notes.

Keep in mind the absolute minimum acceptance rate was 58%. One can only imagine the last minute negotiations.

Now that CIT is a well-capitalized, self-sustaining company once again, it can proceed to going back to what it does best, which is lend third liens to 8x leveraged small businesses in the hopes of collecting juicy 20% downside IRRs.

Comments

[Michael Terry:]

Interesting how the bondholders who loaned the company $3B (loan is actually a much friendlier term than might be used, loansharking laws being what they are) has already tendered 58% of the August maturity and couldn't pull their tenders (hence the increase in price). Now if only they could come up with a new reason for the holders of the $300MM 11/1/09 and $500MM 11/3/09 maturity to tender below par.

Aug 17 12:46 PM

[LT Trader:]

CIT has averted bankruptcy - for now. Can't discount there is a possibility that bankruptcy has just been delayed. Many companies that use their services are looking for alternative suppliers of CIT's services. For example, if one has revolving credit through CIT, looking for another company with a more solid balance sheet to provide you that liquidity makes sense.

Aug 17 01:02 PM

[User 472708:]

The only way they can survive is to pass on the new debt to borrowers. They have already sent notices of rate increases to private borrowers. Which should lead to more defaults. Maybe another 6 months and good buy CIT..

Aug 17 01:23 PM

[avlamal:]

as i fervently refuted the impending doom based on the 10q delay as i said no problems getting bond deal done despite hysterical rantings of impending doom in this seeking alapha blog on the 11th;i told u so;this is a nother citi-will go to 5 fairly shortly

Aug 17 01:33 PM

[ERCaptain:]

As a medium term and long term CIT bondholder, I would be glad to accept the 87.5% payout.

Note to CIT -- Please call me. I would like to discuss the parameters of our divorce in a way that would be mutually beneficial.

Aug 18 12:17 PM

[ERCaptain:]

I love the freudian slip, or parapraxis, below. From the context of his response I am sure they meant "good bye".

On Aug 17 01:23 PM User 472708 wrote:
> ... Which should lead to more defaults. Maybe another 6 months and good buy CIT..

Aug 18 12:23 PM