CIT Group Inc. (CIT), which is struggling to restructure billions in debt and stay out of bankruptcy court, has reached a tentative deal with Goldman Sachs Group (GS) over a $3 billion loan Goldman extended to CIT last year, the WSJ reported late Thursday, citing people familiar with the matter.
The paper noted that the deal, which reportedly has Goldman clipping $1 billion off the total owed, could be reached within the next 24 hours. However, the people cautioned the deal had yet to be finalized.
Under the terms of the new agreement, which ends weeks of intense negotiations between Goldman Sachs and CIT’s steering committee of bondholders over a $1 bln payment Goldman was to receive if the cash-strapped New York commercial lender files for bankruptcy, Goldman will reduce the loan to CIT to just more than $2 billion. CIT in turn would pay Goldman about $300 million if it files for bankruptcy.
The deal also could open the door for CIT to secure billions of dollars in new financing from its bondholders, who are currently voting on a sweeping debt exchange plan, which seems unlikely, or a prepackaged bankruptcy, a scenario that has become increasingly likely over the past several weeks.
The Journal said that the new loan would be arranged by Bank of America/Merrill (BAC) and raised among as many as 50 of CIT’s bondholders. Others have also explored financing for CIT, including billionaire investor Carl Icahn, who Monday offered to underwrite a $6 billion loan that would save the beleaguered firm about $150 million in fees.
Shares of CIT rose 6 cents, or 5.36 percent, to $1.18 in midday trading.