CIT Group was in discussions yesterday with potential lenders to secure financing, after the collapse of rescue talks with the government left the company on the brink of bankruptcy.
The US-based small-business lender employs over 450 people in Ireland and has been based here for 10 years. In 2007 it announced plans to expand its Dublin workforce to 600 over five years.
CIT stocks and bonds plunged as the 101-year-old lender to hundreds of thousands of small and medium-sized businesses faced a worsening liquidity crunch that some warned could worsen the effects of the economic downturn for some firms.
After markets closed, CIT said in a statement its board of directors and management were evaluating alternatives to improve the company's liquidity, adding the firm was in discussions with potential lenders to secure financing.
As CIT's bonds also sank, 10 to 15 CIT bondholders with over $500 million in notes of the lender held an emergency conference call yesterday afternoon to discuss options, according to a source familiar with the matter.
Among the participants were Pacific Investment Management, the unit of German insurer Allianz SE led by prominent bond fund manager Bill Gross, the person said.
CIT's large bondholders were discussing a plan to exchange $5 billion of debt for equity, the Wall Street Journalreported on its website.
The move was part of plans that would also include CIT raising $2 billion to $3 billion in financing, which would be secured and come from a group of CIT's debt holders, the paper reported.
The paper said the plans would depend on CIT getting government clearance to transfer some assets to its bank.
An asset sale or debt restructuring would provide CIT only temporary relief and bankruptcy was the most likely scenario, analysts at investment bank Sandler O'Neill said.
When asked about CIT, White House spokesman Bill Burton told reporters that President Barack Obama had set high standards for granting aid to companies. "A lot of that had to do with whether or not they could show themselves to be sustainable in the long term," Burton said.
“With these talks ending fruitlessly, we think CIT likely was too stressed for any temporary government solution,” analysts at brokerage Stifel Nicolaus said in a research note.
Reuters