CIT: The Fleecing Continues

From a filing this morning from CIT (CIT):

CIT Financial Ltd., a wholly owned subsidiary of CIT Group Inc., has reached an agreement to amend its $3 billion securities-based financing facility with Goldman Sachs International. Pursuant to the amendment, the commitment amount of the GSI Facility has been reduced to $2.125 billion, effectively eliminating the currently unused portion of the facility, and CFL has agreed to post additional collateral to secure amounts due to GSI under the GSI Facility. In connection with the reduction of the commitment amount of the GSI Facility, CFL made a payment of approximately $285 million representing the proportional termination fee payment to GSI as required for any such reduction under the original terms of the GSI Facility. CFL has initially posted additional collateral in the amount of $250 million, which amount will fluctuate over time pursuant to the terms of the amendment.

The Goldman (GS) facility will not become due and payable upon bankruptcy, but still have to meet certain coverage tests. This comes on the heels of the news released 10/28:

The new Expansion Credit Facility term loans mature in January 2012, with an option to extend maturity until January 2013, and bear interest at LIBOR plus 7.5%, with a 2% LIBOR floor, payable monthly. The Expansion Credit Facility provides for (i) commitment fees of 2.5% of the commitment amount, payable upon signing, and 2.5% of the drawn amount, payable upon the funding date, and (ii) a 2% call premium during the first year of the facility. The Expansion Credit Facility is subject to a fair value coverage covenant of 2.5x the outstanding loan balance tested quarterly and upon the financing, disposition or release of certain collateral.

It's over, friends, and CIT is trading around $0.80 too high.

Disclosure: no position in CIT.

Comments

[JRScott:]

So if I currently hold shares of CIT are they now worthless? If not, should I just hang on for a year and hope for the best?

Oct 30 03:51 PM

[Victory 1:]

SELL NOW___IF BK--u loss ALL--IF no BK--then buy back again
asap after annoucement--OK. TOO much to loss all your money.
THis way--u stand a chance to get what u have to trade again
some where & if No BK--which I pray NO--but still I got out so I can sleep this week-end peacefully, then get back in early pre-market
online monday morning --I had over $30,000--too much to leave in .Ok --I took out $19,000---so I will be back in early PRE markey when word comes out--NO BK. BE safe--very bad market this last wk--I should have gotten out before this but I beleive in CIT making it.


On Oct 30 03:51 PM JRScott wrote:

> So if I currently hold shares of CIT are they now worthless? If not,
> should I just hang on for a year and hope for the best?

Oct 30 04:26 PM

[Michael Terry:]

Shares are not worthless - yet. The company is preparing for the bankruptcy filing - then they will be worthless.


On Oct 30 03:51 PM JRScott wrote:

> So if I currently hold shares of CIT are they now worthless? If
> not, should I just hang on for a year and hope for the best?

Oct 30 09:49 PM

[ATLBob:]

With all due respect, the time to sell shares in CIT was some time ago. There have been many clear signals to avoid and/or sell CIT and realize at least a modest payment for shares before the entire house of cards collapsed. Anyone who held on or who purchased CIT shares hoping for a miracle wasn't investing: they were gambling and hoping for the best. From a Company perspective, the pre-packaged bankruptcy is the most 'clean' means of regrouping and having a fresh start; unfortunately, that reality equates to a complete wipe-out for any shareholders who unwisely held onto shares of CIT.

Oct 31 11:08 AM

[Stuyvesant:]

welome back, about time

Oct 31 10:37 PM