CIT Group Inc’s board approved a deal late on Sunday with major bondholders to keep the company out of bankruptcy with a US$3 billion rescue loan, the New York Times reported.
The emergency financing is intended to give the firm time to restructure some of the billions of dollars in debt payments coming due this year, the Times reported, citing anonymous sources.
CIT representatives could not be reached for comment.
CIT had been negotiating with key bondholders — including bond manager Pimco — in an attempt to avoid a bankruptcy filing. Jeffrey Peek, the company’s chairman and chief executive, was actively involved in the talks, according to a person briefed on the matter. The person spoke on condition of anonymity because the talks are confidential.
CIT has been scrambling to raise US$2 billion to US$4 billion after the federal government refused to bail out the company. Rescue talks with government regulators broke off late on Wednesday after days of round-the-clock negotiations.
Under the deal, CIT’s main bondholders would give the company US$3 billion at an initial rate of 10.5 percent, the Times reported.
A bankruptcy filing would have threatened funding for scores of small businesses across the country. It also would have wiped out US$2.3 billion in federal bailout money injected into the company.
The lender faces US$7.4 billion in debt due in the first quarter of next year. Highlighting its woes, CIT will be removed from the Standard & Poor’s 500 index on Friday and replaced with software distributor Red Hat Inc.
CIT had warned that depriving it of more federal aid could imperil about a million corporate borrowers — from Dunkin’ Donuts franchisees to retailer Dillards Inc. But the administration of US President Barack Obama turned down the company’s request, showing that it was drawing a line on federal rescues for troubled financial firms.
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