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Commercial lender CIT Group, teetering on the brink of bankruptcy, said Wednesday it has secured $4.5 billion of additional financing.
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Photo by: Americasroof Struggling lender CIT obtained $4.5 million more in financing from its creditors Wednesday. |
Lenders in this new facility will be among the first in line to collect money from CIT if it goes bankrupt.
The facility is backed by an estimated $30 billion of assets, which also are supporting a $3 billion loan the company received over the summer.
The new facility is a setback for activist investor Carl Icahn, who also had been trying to provide the company with credit.
CIT's Chief Executive Jeff Peek said in the statement that the company will use the funds to continue its business of lending to small and medium-sized companies as it tries to restructure.
Icahn is pushing for CIT to stop making new loans, and instead file for bankruptcy, collect money from its existing loans and use the funds to pay off creditors.
The 101-year-old company is trying to restructure its liabilities by getting investors to forgive at least $5.7 billion of debt and exchange their securities for new notes before the offer expires on Oct. 29. Investors held about $30 billion in unsecured debt at the end of June.
If CIT does not get enough support for the exchange, it hopes that creditors will agree to a prepackaged bankruptcy.
People familiar with the matter told Reuters this week that the exchange is likely to fail, and the company is increasingly likely to file for bankruptcy.
Sources told Reuters last week that the company was working on a new credit facility that could serve as debtor-in-possession financing if the company filed for bankruptcy.
CIT said it agreed to the new facility after it was unable to determine whether billionaire investor Carl Icahn, who had offered to provide the company with a $4.5 billion term loan Tuesday, had arranged sufficient funding for his proposal.
Icahn, has snapped up CIT debt in the past few months and claims to be the company's largest bondholder.
Tuesday, he also offered CIT's small bondholders protection of the value of their debt if they supported his effort to block the lender's plan.
CIT said Wednesday that it is putting together a process for naming directors if the company files for a prepackaged bankruptcy. In that scenario, most of its directors will have been chosen by bondholders, the company said. Current directors would make up no more than five of 13 directors to be elected at next year's annual meeting.
CIT's shares closed 12 percent higher at $1.08.
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