CIT averts bankruptcy with $3 billion loan from bondholders: report

20 Jul 2009

The board of small business financier, CIT Group Inc, has approved a $3 billion rescue loan from major bondholders to save the company from bankruptcy, newspaper reports said today.

Reports said the $3 billion (£1.8 billion) loan would allow CIT, which had reported losses to the tune of over $2.4 billion since 2007, to restructure debt.

A leading provider of financing to small businesses and middle market companies, CIT was in talks last week with JPMorgan Chase & Co and Goldman Sachs Group Inc for short-term funds, to avoid bankruptcy (See: CIT in talks with JP Morgan, Goldman for short-term funds: report).

Reports said bond-holders have agreed to initally price the loan at 10.5 per cent, is intended to give the ailing CIT time to restructure billions of dollars in debt payments becoming due this year.

New York-based CIT, which received a $3.75 billion rescue loan in December, said it needed $2-4billion more. It has been looking to raise between $2 billion and $4 billion after the federal authorities denied it further access to bailout funds.

CIT, is facing a $7.4 billion in debt claims in the first quarter of next year and is due to be replaced by Red Hat in Standard & Poor's 500 index next Friday.