CIT Group Inc. has two stress-inducing deadlines looming on the horizon: Friday, for a debt tender offer, and Oct. 1, for a restructuring plan.
In a regulatory filing Tuesday with the Securities and Exchange Commission, CIT said the first steps of its restructuring plan are to complete a tender offer for its outstanding $1 billion in senior notes due Monday. It already reached an agreement with major bondholders for a $3 billion secured term loan facility, which has been drawn down. Presuming the tender offer is successful, neither CIT nor the steering committee of the bondholder lending group intends to file for Chapter 11 bankruptcy court protection.
However, if the tender offer is not completed and the firm is unable to obtain alternative financing, the company said it would be in default under its credit facility and “could seek relief” under the auspices of the bankruptcy court.
CIT previously said it had received enough offers, or 58 percent of the debt to be tendered, to complete the repurchase program. The tender offer expires Friday.
Shares of CIT dropped 28 cents, or 18.9 percent, to $1.20 in New York Stock Exchange trading Tuesday.
Looking ahead, CIT is working with the steering committee to develop a restructuring plan acceptable to a majority of the committee’s members by Oct. 1. A draft agreement is due Friday and presumably will include completion of the Aug. 17 tender offer.
The SEC filing was necessitated by CIT’s failure to file its quarterly report for the period ended June 30. CIT included information about the tender offer and events leading up to it, as well as the planned restructuring strategy, as reasons for being unable to file a quarterly Form 10-Q report on time. The quarterly reports are due 40 days after the end of the fiscal period, according to the SEC.
CIT said it expects to file the 10-Q by Monday. It also reiterated material from a Form 8-K report filed on July 21 in which it said it expects to file a second-quarter net loss in excess of $1.5 billion. The six months loss is expected to be more than $1.9 billion.
Moreover, the company repeated from its July 21 filing that its “ability to continue as a going concern” had been placed in “substantial doubt” because of the effects of “ongoing stress in the credit markets, operating losses, credit ratings downgrades and regulatory and cash restrictions” on its funding strategy and liquidity position.
An Aug. 9 research note by CreditSights analysts Adam Steer and David Hendler left much doubt about CIT’s future.
The two said, “Over the longer time horizon, we believe the threat of bankruptcy becomes more viable because CIT’s business model is broken.” They added a broad-reaching exchange offer might be a possibility given CIT’s sizable maturities in November totaling $872 million and the terms of the loan facility that require the adoption of a restructuring plan by Oct. 1.
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