CIT Group Announces Amendmends to its Restructuring Plan

CIT Group (NYSE:CIT) announced late Friday a series of amendments to its sweeping debt-exchange plan after struggling to build bondholder support for concessions that are aimed at reducing the company’s multi-billion dollar debt load.

The amended terms by the lender, which  were announced in a statement released about 45 minutes before the midnight deadline, include, among others: a cash sweep mechanism to accelerate the repayment of the new notes; the shortening of maturities by six months for all new notes and junior credit facilities; an increased amount of equity offered to subordinated debt holders ; and an interest rate increase, from 7% to 9%, on the Series B Notes being offered by CIT Delaware Funding. The changes would also provide preferred stockholders contingent value rights in the reorganization and modify the allocation of common stock in the company’s recapitalization after the exchange offers, as part of an agreement with the Treasury Department.

The aim of the restructuring plan, launched by the beleaguered lender on Oct. 1, is to get holders of about $31 billion in bonds to reduce its debt by at least $5.7 billion through a debt exchange.

CIT, which has been devastated by the downturn in the credit markets and is attempting to restructure its operations to remain in business, is also soliciting votes for a prepackaged reorganization plan in case it is forced to file for Chapter 11 bankruptcy protection. The plan will become effective if CIT fails to win bondholder support for the exchange offer.

According to the co.’s statement, bondholders have until 11:59 p.m. EDT on October 29 to tender their bonds in the plan and to vote on the terms of the prepackaged bankruptcy.

CIT also said that completion of either the debt exchange or a bankruptcy filing would create the right conditions for a significant flow of capital and improve the company’s liquidity.

The amended exchange offer comes just days after CEO Jeffrey Peek said he would step down from the company at the end of the year.

CIT shares closed down 5.08% at $1.12 in NYSE trading.

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