CIT Group Inc. said bondholders agreed to provide $3 billion in emergency financing, giving the 101-year-old commercial finance company time to devise a recovery plan that averts bankruptcy.
CIT, led by Chief Executive Officer Jeffrey Peek, is receiving a $3 billion secured term loan with a 2 ½-year maturity, the New York-based firm said today. Loan proceeds of $2 billion are available immediately and the rest is expected within 10 days, the company said.
The group of bondholders stepped in after the U.S. declined to give a second bailout to the firm, which posted $3 billion of losses in the last eight quarters. The lender finances about 1 million businesses from Dunkin’ Brands Inc. to Eddie Bauer Holdings Inc., and Moody’s Investors Service said July 16 CIT probably would go bankrupt. CIT has $1 billion of notes that mature August 17 and is asking investors to swap those notes for 82.5 cents on the dollar.
“Anything that buys them time is a good thing,” said Hank Calenti, an analyst at Royal Bank of Canada in London, before the announcement. “There’ll be pain all round if CIT goes under, because they finance entrepreneurs, small businesses that no one else will touch.”