CIT Group Inc. tightened the terms of its offer to buy back $1 billion in bonds coming due Aug. 17, offering less for those who exchange theirs later, and said it did not intend to file for bankruptcy protection if the debt buyback is successful.
This story first appeared in the July 27, 2009 issue of WWD. Subscribe Today.
CIT would instead restructure its operations away from the gaze of a bankruptcy judge.
“However, there can be no assurance that these restructuring efforts will be successful,” cautioned the firm in a filing with the Securities and Exchange Commission.
CIT also said it would likely default on the debt if the offer fails and might have to file for bankruptcy.
Under the amended terms of the buyback offer, CIT said it would pay $775 for every $1,000 in debt tendered after 5 p.m. Friday. Previously, debt holders tendering then would have received $800. Bondholders tendering their notes by the Friday deadline will still receive $825 per $1,000 in principal.
The company, which provides an estimated 60 percent of the fashion industry’s factoring volume and loaned fashion companies and retailers about $4 billion last year, reached a deal to avoid bankruptcy last week in which key bondholders, including Pimco and Oaktree Capital, would provide it with $3 billion in financing, albeit at an interest rate of LIBOR, the London Interbank Offer Rate, plus 10 percent. The agreement allowed it to stave off bankruptcy, a possibility that had loomed larger after CIT failed to secure a second round of rescue financing from the federal government.
CIT received $2.33 billion from the government’s Troubled Asset Relief Program in December. Still, it faces the $1 billion in debt that comes due next month and which it’s trying to buy back and a total of about $7 billion coming due in the next year.
The firm’s shares rose 1 cent, or 1.4 percent, to 75 cents on Friday. They hit bottom at 31 cents on July 16, as the severity of the crisis became clear, but have traded as high as $1.44 since.