CIT Group, the small-business lender, has reached a tentative deal with a bondholder group for $3 billion in rescue financing, which the lender hopes will help it avoid bankruptcy, sources close to the situation said last night.
The bondholder group, which includes Pacific Investment Management Company (Pimco) and some other top CIT holders, is expected to provide the financing with a 2 1/2-year term, the sources said.
CIT set up an Irish operation in 1999 and in 2007 announced plans to expand its workforce in Dublin to 600 from 450 over a five-year period.
The deal is part of a larger restructuring plan, the source said.
The $3 billion rescue financing plan will be backed by remaining unsecuritized assets which likely exceed $10 billion, another source familiar with the matter said.
"The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion," that source said.
Curt Ritter, the company's spokesman, declined to comment.
CIT lends to nearly one million small and mid-sized businesses. Its problems surfaced two years ago in the wake of chief executive Jeffrey Peek's decision earlier in the decade to expand into subprime mortgages and student loans, both potentially highly profitable but fraught with added risk.
Mr Peek, who was initially surprised when the lender did not get government help, led the company's efforts to get the funds from private sources, one of the sources said.
CIT has been in talks with the bondholder group to hammer out the rescue financing deal, Reuters reported on Saturday, citing a source close to the situation.
CIT gained the status of bank holding company in December so it could draw $2.33 billion of taxpayer money from the Treasury's Troubled Asset Relief Program.
But last-ditch rescue talks with the US government failed last week as the Obama
administration declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.
CIT has about $40 billion of long-term debt, according to independent research firm CreditSights.
About $1.1 billion of debt will come due in August, followed by about $2.5 billion by the end of the year.
Reuters