CIT Bondholder Call Today Likely To Decide Company Fate

Dow Jones reporting that a select group of CIT bondholders, led by Little Bear Investments, will hold a 4:30 pm call with the company to discuss preferential terms to the proposed exchange offer which would result in a "leaner and meaner" Club CIT. The issue: long-dated creditors are getting a rather unpleasant deal in that even while they will not be offered to roll their debt holdings, what they will get is a "small amount of preferred shares in the restructured entity."

From Dow Jones:

Under the exchange, bondholders would get new secured debt worth as much as  90 cents on the dollar if they currently own bonds that mature this year, but  would end up with less if they own bonds maturing later.

The sliding-scale ratio of debt to equity offered to bondholders under the plan is of a particular concern to holders of CIT's 12.00% subordinated bonds due December 18, 2018, and 6.10% junior subordinated notes due March 15, 2067. Owners of this debt aren't being offered any new debt in the exchange offer and only a small amount of new preferred shares in the restructured entity.

Yet, as often happens, these calls are merely for postuing purposes. The final, outcome, as predicted by CreditSights does not look good for creditors (and likely not good to the debtor either).

Analysts at CreditSights said in a note to clients Monday that CIT's debt exchange has "very little hope of succeeding," adding that owners of CIT's  bonds should sell their debt. "Currently CIT's interest expense is too high, it cannot borrow economically to fund new business, and its liquidity is stressed," the analysts said.

The alternative to a failed prepack is, of course, free-fall Chapter 11, although judging by which deals are representative of CIT's loan portfolio, that 11 could promptly turn into a 7, reminding market participants just how horrendous the assets that backstop the trillions in outstanding debt really are. And once you remove the government's backstops (never) CIT's fate would be promptly followed by virtually all of its financial peers.

Comments

[Project Mayhem]

haha "little bear"  , that's poetic

[bugs_]

We are only little dippers not BIG DIPPERS.

[Assetman]

Does anyone have the conference call number?

Hehe...

[Anonymous]

"Does anyone have the conference call number?"

Call the Goldman Sachs lobby receptionist and they will transfer your call.

[ZerOhead]

Ironically CIT was one of the few financial institutions out there that performed a truly indispensible service... regardless of what happened to their financials.

CIT will be missed. Until it's back.

[McGriffen]

Middle-market commercial lending, who exactly fills that gap in CIT's absense?  I don't know enough to speculate...it's not gonna be "GS" or the like.

CEO Peek...yet another one whose idiotic/bold moves into subprime & student lending imploded.

[Anonymous]

Little Bear intends to hold a conference call on Tuesday, October 6th at 4:30pm EDT with other owners of Sub Debt to discuss in more detail our opinions regarding the Bond Exchange. Bondholders who wish to participate on this call are kindly asked to pre-register by emailing their name and affiliation to [e-mail]. You can then participate by dialing [phone] and use participant code# 8865161. International callers are asked to dial [phone] and use the same participant code.

[Anonymous]

Meet the team of "Little Bear". Today is a school night, so the call will need to wrap up early.

http://www.littlebear.us/team.html

[Anonymous]

Interesting call. I was able to join as a silent participant.

Little Bear basically said that they would be willing to go to bankruptcy if necessary, but they would prefer to work out a more favorable restructuring.

SUB debt holders are unhappy with current swap terms and want to hold out for more.