CIT Group amends debt restructuring offer to enlist more bondholder support.
CIT, a major lender to small and midsize businesses that has struggled under mounting losses and tight credit availability, launched the restructuring effort Oct. 1 with the hope that it will trim at least $5.7 billion from its near-term debt. It is also asking bondholders to approve a prepackaged reorganization plan in case it is forced to file for Chapter 11 bankruptcy protection, the AP reported.
The debt exchange changes have the backing of its board and a steering committee of bondholders, the company said in a statement late Friday, according to the AP.
CIT Group's losses have been mounting as its borrowing costs have outstripped its income amid the credit crunch. It has received $2.3 billion in federal bailout money last fall and a $3 billion emergency loan in July from some of its largest bondholders, the AP reported.
"Over the last two weeks, we have continued to work constructively with the steering committee and believe that these amendments will further build bondholder support for our restructuring plan," CIT Group Chairman and CEO Jeffrey Peek said in the statement, MarketWatch reported. The company "will reduce the uncertainty around our business" through either completing the debt exchange offers or an expedited in-court restructuring.
The new plan includes issuance of an undetermined amount of preferred stock on the New York Stock Exchange. The NYSE accepted CIT's application of its financial viability exception to the exchange's shareholder approval policy in connection with the stock offer, the AP reported.
The company aims to become a "well-capitalized bank holding company" modeled on a "new bank-centric funding model," MarketWatch reported.
I think that it is very important that CIT finds a way to reorganize its company. Even though it is a hard time for some financial companies to thrive, it definitely is possible, which is proven through other companies. However, Citi might also experience further losses due to their potential sale of Banamex, which is Citi's Mexican subsidiary.
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