CIT Announces Restructuring Plan

mike lewis

• October 02 2009
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Troubled small business lender CIT, upon whom much of the industry relies, announced a restructuring plan yesterday designed to keep the company out of bankruptcy by trimming $5.7 billion off its debts.

The plan hinges on a series of voluntary exchange offers “designed to recapitalize its balance sheet and significantly reduce its debt in an out-of-court restructuring,” says the company.  On the flip side, if the plan does not go ahead or proves unsuccessful, the company says it will be forced to seek Chapter 11 protection: “Under the plan, CIT Group Inc. and CIT Group Funding Company of Delaware LLC (Delaware Funding) are launching exchange offers for certain unsecured notes. If the Company does not achieve the objectives of the exchange offers, it may decide to initiate a voluntary filing under Chapter 11 of the U.S. Bankruptcy Code. Therefore, the Company is concurrently soliciting bondholders and other holders of CIT debt to approve a prepackaged plan of reorganization. The Company has been informed by advisors to the Steering Committee that, subject to review of the offering memorandum, approximately $10 billion of outstanding unsecured indebtedness have already indicated their intention to participate in the exchange offer or vote for the prepackaged plan of reorganization.”

“Over the last several months, CIT’s management, together with its Board of Directors and outside advisors, has developed a comprehensive plan to position CIT for future success,” said Jeffrey M. Peek, Chairman and CEO. “We believe this plan maximizes franchise value and can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process. Upon completion of either alternative, CIT will be a well-funded bank holding company with a strong capital position and market leading franchises.

“We have the liquidity to serve our small business and middle market clients throughout this process,” Mr. Peek continued.

Let’s hope so.

To read the entire statement, go to cit.com.