A bankruptcy judge on Monday gave CIT Group Inc. the go-ahead to borrow as much as $500 million to operate while in Chapter 11 proceedings.
The approval gives the commercial lending giant, a primary lender to many small and midsize businesses, the ability to issue letters of credit to back its debt. In a court filing last month, CIT said it would use the letters of credit to support its own obligations and commitments as well as those of its subsidiaries.
A group of lenders led by Bank of America Corp., which will serve as administrative agent, provided the loan.
Judge Allan Gropper signed off on the arrangement in U.S. Bankruptcy Court in Manhattan. CIT had obtained an interim order of the court earlier this month that allowed it to borrow $125 million of the loan.
CIT’s holding company filed for bankruptcy on Nov. 1 after sustaining losses in the subprime mortgage crisis and taking $2.3 billion in aid from the federal Troubled Asset Relief Program. The filing did not include the firm’s operating divisions, such as its factoring unit.
The company listed $71 billion in assets and $64.9 billion in debts at the time. Bank of America is the largest of its more than 100,000 creditors and is owed about $7.5 billion, according to court records at the time of the filing.
CIT said it hoped to emerge from Chapter 11 by the end of the year through a prepackaged restructuring plan, and said last week that it had in “excess” of the minimum bondholder support it needs.
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