UPDATE: CIT Group Lines Up $4.5 billion in Credit, $1 Billion from Icahn
By Heath E. Combs and Cliff Engel, Furniture Today Staff -- Gifts and Dec, 10/30/2009 10:08:00 AM
New York — Troubled furniture and retail industry lender CIT Group Friday entered into an agreement with investor Carl Icahn for a $1 billion line of credit to use as it pursues its restructuring plans. The line can be drawn on before Dec. 31, subject to certain conditions, and could be used as debtor-in-possession financing should the company file for bankruptcy protection.
The new money is in addition to Wednesday's expansion of its original $3 billion senior secured credit facility by an additional $4.5 billion. CIT had said in a press release that the new $4.5 billion loan would be secured by the same assets as the company's existing $3 billion facility.
The new borrowing will be used to refinance a portion of the company's secured debt, which may come due as a result of CIT's restructuring.
"This expanded credit facility will allow us to continue to serve our existing small business and middle market customers as we advance our restructuring plan," said Jeffrey Peek, chairman and CEO.
Bloomberg reported that the bond and credit-default swap prices indicate that CIT Group will file for bankruptcy after its debt exchange offer expired, and before $800 million in bonds mature next week. The deadline for a $30 billion debt swap offer that CIT floated to bondholders last month expired at midnight, and the lender said early today it was still tabulating results.
CIT has said for weeks that a pre-packaged bankruptcy is an option if its exchange offers failed.
The new financing announced Wednesday matures in 2012 and includes an option for CIT to extend all or part of it for an additional year.
CIT had previouslyh rebuffed Icahn, saying that while it had received letters of commitment from investor Carl Icahn to provide a $4.5 billion term loan, it hadn't received a signed credit agreement or evidence that Icahn could fund the commitment.
CIT's board of directors, which Icahn criticized sharply in one of his recent letters to bondholders, decided that the company's interests were better served by proceeding with the new facility. Bank of America served as the collateral and administrative agent for the new loan.
Icahn said CIT is overpaying for the credit facility as a way to curry favor with existing lenders by providing them with millions in fees.
CIT faces a Thursday deadline for the voluntary exchange offer it presented for another portion of its debt. The offer was designed to recapitalize the company's balance sheet, should it not file for bankruptcy protection.
The company said earlier this month that it must reduce its total debt by $5.7 billion.
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