CIT Expects $1.5 Billion Loss, May File for Bankruptcy If Debt Swap Fails

[Purveyor]

By Caroline Salas and Pierre Paulden

July 21 (Bloomberg) -- CIT Group Inc., the 101-year old commercial lender seeking to avoid collapse, said it expects to report a loss of more than $1.5 billion for the second quarter and may need to file for bankruptcy if it’s unable to tender for notes maturing next month.

CIT’s “existing liquidity” isn’t enough to repay the $1 billion of floating-rate notes maturing on Aug. 17, the New York-based lender said today in a regulatory filing. CIT, which announced a $3 billion rescue financing from its bondholders yesterday, has asked holders of the August notes to swap their claims for 82.5 cents on the dollar.

“Late in the second quarter of 2009, our available liquidity dropped below the level necessary to operate our business,” the company said in the filing. “Even if the offer is consummated successfully, we will require significant additional funding during the remainder of 2009 and beyond to operate our business.”

As part of the terms of its loan from bondholders, CIT has to get the creditors to approve a restructuring plan by Oct. 1, the company said in the filing. Bondholders providing the financing include Boston-based hedge fund Baupost Group LLC, Capital Research & Management Co., Centerbridge Partners LP, Oaktree Capital Management LLC, Pacific Investment Management Co. and Silver Point Capital LP, people familiar with the deal said yesterday

CIT declined 27 cents, or 21 percent, to 98 cents as of 10:15 a.m. in composite trading on the New York Stock Exchange.

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http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5XYiownx2o

[SoCalDem]

1. Wouldn't it be "loverly" if ordinary people could just do a "debt-swap"

and erase their debt problems..

Basically, the bigger you are, the more fast & loose you can play with your money.