Famed corporate raider Carl Icahn sent a letter to CIT Group Inc.’s board on Monday, offering to underwrite a $6 billion loan to the cash-strapped commercial lender to help it avoid a bankruptcy filing. At the same time, Icahn, who has made himself a champion of corporate governance, slammed CIT’s board of directors, calling its behavior “incompetent and unconscionable.”
In a statement, Mr. Icahn said CIT’s board, “which has reigned over its ruin,” is proposing a reorganization plan that “is designed to keep the existing regime and its handpicked successors in control” while also protecting the board from certain claims by stock and bond holders.
“As CIT’s largest creditor, we see no reason that the current board (whose negligence created this mess in the first place) should continue to control our company,” Icahn wrote in the letter.
Icahn said also that CIT is “shamelessly” offering certain large bondholders the opportunity to purchase $6 billion in secured loans well below their fair market value.
Icahn’s offer to underwrite a $6 billion loan, which he says would save the century old firm as much as $150 million in fees to prospective lenders, comes after CIT Group (NYSE:CIT) sweetened its bond exchange offer late Friday by accelerating the repayment of new notes. The co. agreed to shorten its maturities by six months for all new notes and junior credit facilities while offering more equity to subordinated debt holders. CIT also asked bondholders to approve a prepackaged plan of reorganization that would allow it to initiate a voluntary bankruptcy filing under Chapter 11 if the debt exchange failed.
CIT had no immediate comment on the Icahn letter.
Shares of CIT jumped nearly 20% in early NYSE trading to $1.36. The stock is down three-quarters this year.