Connect with us

Hi, what are you looking for?


CIT reaches rescue deal

WASHINGTON, July 21 – Business lending giant CIT Group reached an emergency loan agreement worth three billion dollars with a group of its main bondholders to avoid bankruptcy, the firm said in a statement Monday.

The private loan, sought after the US government declined last week to offer the company another bailout, is "intended to provide CIT with liquidity necessary to ensure that its important base of small and middle market customers continues to have access to credit," CIT said.

"We are pleased that CIT is in a position to continue to serve our valued small business and middle market customers," said the company\’s chief executive Jeffrey Peek.

According to earlier reports, the board that runs CIT, which specializes in financing for tens of thousands of small and medium-sized businesses, had approved a deal late Sunday with some of the bank\’s major bondholders.

The money, arranged by Barclays Capital, is meant to give the company several weeks to set up an exchange of bondholders\’ debt for equity, alleviating some of the pressure from billions of dollars in obligations, the New York Times said.

The deal would charge CIT high interest rates to secure the firm\’s short-term lending, the Wall Street Journal reported on Sunday.

Bondholders calculated their losses would be higher if CIT filed for bankruptcy and quickly sold off its assets, the newspaper said.

CIT Group looked last week to be headed for an almost certain bankruptcy after the US government rejected its plea for a fresh bailout — after already providing 2.33 billion dollars — despite fears of repercussions for the overall economy.

Shares in CIT plunged 75 percent to 40 cents in late trading last Thursday on worries of an imminent collapse of the lender. At that time, Fitch Ratings downgraded the long-term credit ratings of CIT, saying as much as 35 billion dollars in its debt could be near default.

Advertisement. Scroll to continue reading.

The decision not to bail out CIT came after the US government injected tens of billions of dollars into the banking system and outlined a policy of helping large firms whose failure could lead to a shock to the financial system.

"Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies," the Treasury said last week.

In December, CIT Group won approval to change its charter to a bank holding company and received the capital injection from the US Treasury as part of an emergency rescue package.

The company is a major player in industrial loans including aircraft financing, but last year sold its real estate lending and took other steps to deal with the unprecedented credit crunch.

US stocks rallied Monday amid rumors of the impending private sector rescue for CIT Group. The Dow Jones Industrial Average climbed 104.21 points (1.19 percent) to close at 8,848.15, building on a gain of more than 7.0 percent last week.

  Shares of the company, which last week appeared on the brink of bankruptcy, surged 78 percent to 1.25 dollars on news that its bondholders were prepared to extend further credit to help avert a collapse of the big lender.

"A major thorn in the bulls\’ side could be removed very soon, as CIT Group Inc. has reportedly secured three billion dollars in private bailout capital," said Joseph Hargett of Schaeffer\’s Investment Research.

Click to comment

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...


NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...


NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...


NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...


NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...