CIT’s Next Hurdle: Its November ’09 Bonds?

08-11-2009 | Source: Total Securitization

CIT Group will have to contend with $800 million in bonds coming due in November after temporarily staving off bankruptcy by sweetening the terms of its $1 billion tender offer. “In the next evolution CIT will [likely] do some type of exchange for the other bonds,” said one portfolio manager invested in the company’s bonds. He said it was unclear if CIT would offer security, or how it would structure a potential exchange.

On Monday, CIT raised the tender price for its floating-rate notes to 87 1/2 cents on the dollar from 82 1/2 cents, and lowered the minimum participation requirement to 58% from 90%. The August floaters moved up on the news. They are now trading around 95, approximately where they were trading before bankruptcy speculation engulfed the New York-based lender to middle market companies. “CIT bought more time. They staved off bankruptcy [for three to six months],” the portfolio manager said.

The November 4 1/8% bonds and the 6 7/8% bonds had been trading in the 80s and then traded as low as the 60s on the bankruptcy speculation. Following the amended tender offer they have since moved up into the low 70s. The company’s bank debt, meanwhile, has also recouped some value. It was trading at 57-59 today, up from 54-56 before the tender offer was revised.

Curt Ritter, CIT spokesman, did not immediately return a call for comment.