Business lender CIT Group says it has completely drawn its $3 billion credit line as it works to restructure. The company also called a halt to paying dividends on its preferred stock.
CIT Group continues to hold a significant portfolio of loans in the media sector, including radio and television, although it has closed down its media lending group and is struggling to stay afloat. It was turned down in a bid for federal government assistance, but since then its private sector creditors have negotiated terms which have made it possible for CIT to avoid a bankruptcy filing.
CIT announced on Friday (8/7) that it had drawn down the final $1 billion in incremental borrowing under the amended credit agreement it reached July 29th with a group of its major bondholders. That brings the total loan amount drawn to $3 billion. “CIT will use a substantial amount of the loan proceeds to support its small business and middle market customers,” the company said.
CIT also announced that the company’s board of directors had decided to suspend dividend payments on its four series of preferred stock in order to improve liquidity and preserve capital while restructuring efforts are ongoing. Payments on CIT’s “Equity Units,” which trade on the NYSE as “CIT PrZ” are not affected by the move.
On August 3rd CIT announced that it amended the terms of its pending offer for its $1 billion Floating Rate Senior Notes due August 17, 2009. The withdrawal deadline was extended until midnight, New York City time, at the end of Wednesday, August 5th. The withdrawal deadline has passed and eligible bonds tendered, and not withdrawn, met the 58% minimum tender condition. The tender offer will expire at midnight, New York City time, at the end of Friday, August 14, 2009.
Evercore Partners and Morgan Stanley are CIT’s financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the financing and restructuring plan. Sullivan & Cromwell LLP served as legal counsel to the Company’s Board of Directors. Morgan Stanley & Co. Incorporated and BofA Merrill Lynch are the Dealer Managers for the Tender Offer and D.F. King & Co., Inc. is the Depositary and Information Agent.