George S. May Business Blog

CIT Group Inc. will live to see another day — $3 billion in financing to come from bondholders

News is swirling about that CIT Group Inc. has signed a deal to receive $3 billion in rescue financing from a group of bondholders and will hopefully be able side step bankruptcy, which seemed imminent last week.

The financing is expected to come on a 2 1/2 year term and will come from a bond holder group of top CIT holders, including Pacific Management Company. The $3 billion financing plan will be backed by CIT’s remaining unsecuritized assets, which likely exceed $10 billion, the second source familiar with the matter said.

 ”The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion,” that source said.

Curt Ritter, the company’s spokesman, declined to comment when the initial details of the deal were reported. Ritter was not immediately available to confirm board approval.

CIT has about $40 billion of long-term debt, according to independent research firm CreditSights. It has lost close to $3.3 billion since the end of 2007, and in a May regulatory filing said it had $10 billion of funding needs to address in the year ending March 31, 2010.

About $1.1 billion of debt will come due in August, followed by about $2.5 billion by the end of the year.

CIT gained a bank holding company status in December so it could draw $2.33 billion of taxpayer money from the Treasury’s Troubled Asset Relief Program.

Still, rescue talks with the U.S. government were unsuccessful last week. The Obama administration turned away from helping, noting that it had set high standards for granting aid to companies. CIT, at that point, was left with only one option: private investors.

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