CIT Group (NYSE: CIT) announced last Friday amendments to the restructuring plan launched on October 1. The New York based lender that focuses on small and mid-size businesses, has been burdened with growing loan losses that has threatened the firm’s livelihood.
The restructuring plan targets roughly $10 billion in unsecured shorter term debt, in hopes to perform an exchange at a pro rata portion for secured notes with maturities of anywhere from four to eight years.
CIT makes the move as it looks to avoid a chapter 11 bankruptcy. The restructuring memorandum states the company must reduce its total debt by an aggregate of $5.7 billion, while meeting debt reduction targets over the next three years.
“Over the last two weeks, we have continued to work constructively with the Steering Committee and believe that these amendments will further build bondholder support for our restructuring plan,” said Jeffrey M. Peek, Chairman and CEO.
“Through the completion of the exchange offers or an expedited in-court restructuring process, we will reduce the uncertainty around our business and further maximize the value of our franchise.”
CIT posted the amendments made to its restructuring effort on its website Friday and are as follows:
The amended terms of the restructuring plan include, among others:
- A comprehensive cash sweep mechanism to accelerate the repayment of the new notes;
- The shortening of maturities by six months for all new notes and junior credit facilities;
- An increased amount of equity offered to subordinated debt holders reflecting agreements with holders of the majority of its senior and subordinated debt;
- The inclusion of the notes maturing after 2018 that had previously not been solicited as part of the exchange offer or plan of reorganization;
- An increase in the coupon on Series B Notes, to 9% from 7%, being issued by CIT Delaware Funding; and
- Provided preferred stock holders contingent value rights in the plan of reorganization, and modified the allocation of common stock in the recapitalization after the exchange offers, as part of an agreement with the United States Department of Treasury.
