Friday, July 17, 2009

Update: CIT Reaches Tentative Deal With Bondholders

*Update (7/20/09) CIT Group appears to have reached a tentative agreement with major bondholders that will provide the ailing lender with $3B in funds. The deal will not ensure CIT's long term survival, but will allow it to skirt a bankruptcy filing that appeared imminent in the absence of some form of bailout.

From Reuters, on the developing saga to determine the fate of CIT Group, Inc.

According to whomever Reuters has described as "a source close to the company", CIT Group, Inc. (CIT) is in last minute talks with both JP Morgan and Goldman Sachs regarding it's status as a non-bankrupt company. This same secret source identifies $2B-$3B as the magic number that CIT is seeking in order to avoid a bankruptcy filing. A scenario such as this would buy the Company two months or so at best; as it would have to begin the immediate sale of assets in order to continue it's existence.

An alternate scenario to anything that has been reported thus far - also derived from an unnamed yet separate source - has CIT bondholders agreeing to a debt-for-new debt swap.

Although situations like this always produce multiple options for a Company - likely being debated ad nauseum in the "war room"- we can't help but suspect that something is...amiss. Maybe it's just us, but whenever several billion dollars of investor capital are at risk, and the price of both debt and equity are gyrating violently at every fresh news release, we are a bit suspicious of conflicting reports from unnamed sources.
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