CIT eyes bankruptcy if debt exchange plan fails
Ailing lending giant CIT Group warned Friday it might file for bankruptcy if it failed to launch a comprehensive debt-exchange plan to beef up capital levels.
Washington: Ailing lending giant CIT Group warned Friday it might file for bankruptcy if it failed to launch a comprehensive debt-exchange plan to beef up capital levels.
The company, which provides financing to small businesses and middle market companies, said it had commenced a restructuring of its capital structure approved by its board and bondholders.
Under the plan, CIT`s bondholders with some 10 billion dollars of outstanding unsecured indebtedness indicated they will participate in the exchange offer or vote for the prepackaged plan of reorganization, the company said in a statement.
CIT, which ran into financial problems after a home mortgage meltdown plunged the country into its worst crisis in decades, has about 40 billion dollars of long-term debt, reports have said.
The company said that the debt exchange offers were conditional upon achieving a debt reduction of at least 5.7 billion dollars, with specific targets for the periods from 2009 to 2012.
The exchange offers are set to expire on October 29.
"We believe this plan maximizes franchise value and can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process," CIT chief executive Jeffrey Peek said in a statement.
"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.
But "if the company does not achieve the objectives of the exchange offers, it may decide to initiate a voluntary filing under Chapter 11 of the US Bankruptcy Code," the statement said.
CIT was rescued from almost certain bankruptcy by some of its largest bondholders in July in a three-billion-dollar emergency agreement after the US government rejected the company`s plea for a fresh bailout.
The government had already provided 2.33 billion dollars to CIT.
The decision not to bail out CIT came after the US government injected tens of billions of dollars into the banking system and outlined a policy of helping large firms as the financial system came under pressure following the crisis.
Operating in more than 50 countries, CIT is a bank holding company with more than 60 billion dollars in finance and leasing assets that provides financial products and advisory services to small and middle market businesses.