Langlui's Big Board and Options Plays

[BullRaid]

Appears CIT will get it backing from the Bondholders.

CIT Limps Into Weekend, Seeking a Lifeline

http://dealbook.blogs.nytimes.com/2009/07/17/cit-limps-into-weekend-seeking-a-lifeline/

Update | July 18, 1:27 p.m. By the close of business on Friday, the CIT Group remained locked in talks with private investors over a potential lifeline as it sought to stave off a bankruptcy filing.

With no government bailout in the offing, the beleaguered lender has turned to its bondholders, some of whom have expressed interest in providing $2 billion to $3 billion in rescue financing, people briefed on the matter told DealBook. The money is meant to buoy CIT long enough to begin an exchange of its bonds for equity, a process that at its quickest would still take weeks to set up.

CIT’s teams of financial and legal advisers huddled with advisers to a handful of the company’s biggest bondholders, with the aim of announcing a financing package by the start of business Monday.

One group of bondholders has offered about $3 billion in bridge financing, a person briefed on the matter told DealBook. This group, however, hasn’t heard yet from CIT.

The lender’s advisers, including Evercore Partners and Morgan Stanley, had sought to raise rescue financing from the likes of Goldman Sachs and JPMorgan Chase, according to people briefed on the matter. But many of these banks declined to participate in an out-of-court financing effort, leaving CIT with its bondholders and other private investors as the remaining sources of a bailout.

Failing that, CIT — a lender to hundreds of thousands of small and midsized businesses across the country — would be forced to file for Chapter 11 protection. Several CIT advisers, including JPMorgan and Morgan Stanley, have begun holding preliminary talks about raising $2 billion to $3 billion in debtor-in-possession financing, people briefed on the matter said. The company has already retained restructuring counsel at Evercore and the law firm Skadden, Arps, Slate, Meagher & Flom.

CIT’s board is being advised by the law firm Wachtell, Lipton, Rosen & Katz.

It remains unclear, however, whether CIT can survive without what it wanted most: access to government financing programs that would have alleviated its financing squeeze. Though it has a bank subsidiary, based in Utah, CIT financed itself primarily through the short-term debt markets. It hasn’t been able to raise appreciable sums of capital in months.

From the beginning of the year until now, CIT sought permission to issue debt backed by the Federal Deposit Insurance Corporation. But federal regulators have ruled out that option, as well as letting the lender move assets to its Utah bank to borrow from the Federal Reserve.

While CIT’s business was harmed earlier this week by concerns that it would not get federal aid — it lost as much as $100 million from customers who drew down their credit lines, according to a person briefed on the matter — that damage has stabilized for now. But the longer CIT is unable to regain access to financing, the more its operations (which did little new business this year) will continue to deteriorate.

– Michael J. de la Merced