UPDATE: CIT Avoids Bankruptcy, For Now
By Staff -- Gifts and Dec, 7/21/2009 10:00:00 AM
New York – According to Furniture Today, major retail lender CIT reached a deal with bondholders that will give it the financing it needs to meet near-term debt obligations and avoid bankruptcy.
The company secured $3 billion in financing from major bondholders and will begin restructuring its liabilities to strengthen its liquidity. The term loan matures in 2.5 years. Some $2 billion is available now and the rest is expected to be committed within 10 days. CIT didn't say how much interest it will pay, but news reports have pegged the rate at 10.5 percent.
The deal should provide CIT with more than enough funding to meet $1 billion in debt obligations due next month. However CNNMoney quoted several financial experts who explained that CIT is not out of the woods yet. "The company still has to get over the debt-for-equity swap hurdle. It (the company's survival) is not guaranteed yet," CNN quotes Chris Munck, a high-yield bond trader at B. Riley & Co, as saying. "Without a viable funding model, we believe CIT may still be at risk of filing for bankruptcy even after receiving emergency financing," Adam Steer and David Hendler, analysts at independent research firm CreditSights, said in a report published Monday.
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