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CIT: L+1000 Bridge Financing
Sunday night edition of America's favorite game: kick the can down the street, better known as "someone else's problem." From the WSJ
The final term sheet still needs to be reviewed by the various
financial and legal advisers, said the people familiar with the matter.
And there is the chance that a final deal could falter over last-minute
negotiations.Under the proposal, CIT would likely pay interest rates 10
percentage points above the London interbank offered rate, said these
people. (As of Friday, three-month Libor stood around 0.5%.) CIT has
also agreed to pledge some of its highest-quality loans as collateral
on the $3 billion package.The new loan could act like a "bridge" to a series of debt-exchange
offers that CIT would launch in order to get bondholders to swap some
of their bonds for equity in the company or for new debt that matures
later.J.P. Morgan would have considered lending if CIT were first to seek
bankruptcy protection, but the bank "couldn't get comfortable with a
deal outside (bankruptcy) court," said one person familiar with the
matter.CIT's advisers, which includes Evercore Partners, then launched talks with its bondholders, led by investment firm Centerbridge.
You mean after Dana and Extended Stay Centerbridge is still around? And now
CIT? Did these guys just buy whatever bonds Goldman was a size seller
in?
Also from Reuters:
The $3 billion rescue financing plan will be backed by remaining unsecuritized assets which likely exceed $10 billion, another source familiar with the matter said.
"The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion," that source said.
So i) bondholders are screwed either way, ii) the company will pay 10%+ on the bridge instead of paying 3.5% on a DIP, iii) the stock will pop tomorrow only to crash to zero ala GM soon enough, iv) Peek will cash out, and v) in 6 months when chapter 11 is inevitable, the company will suddenly become Too Big To Fail and taxpayers will be on the hook after the bulk of any salvagable value will have been leaked away.
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Let's get through another quarter without taking any write downs. Surely, next quarter will be better. Good idea, Mr. Geitner.
But isn't that the MO for how we do everything these days. Push it down the road in the next quarter, year or onto the next generation. Everyone loves to drink but no one wants to pay the tab.
Tyler, I think you are going to be right on all accounts, I'm afraid.
Bondholders aren't in a great position, but I gather I understand why they are putting up the extra capital-- not that it will work. Equity holders have a chance to get out of this pig with Mr. Peek, lucky bastards.
From a free markets perspective, this will only be good if those who make the investments take the all the losses. The taxpayer has lost enough on this heap of junk. CIT took way too many risks and needs to pay for it... even if it takes another 6-12 months longer than we expected.
Good money after bad.
In 6-12 months when unemployment is 12% (and the real number is over 20%) all those retailers that CIT leant money to will be in much better shape.
Hopefully the will blow up before the mid term elections. But some how i doubt it.
kinda like a movie I watched....... in slo mo
Is the CIT news driving the futes tonight?
F$%^ me, yeah, the Nas is up 8 days in a row, let's buy some more overnight!!! [sarcasm off]
Holding over the weekend has turned into a vertitable Russian Roulette game - except that every chamber has a bullet.
BTW, I say it now and I will say it again - I hate this fucking comment system. Tyler - please set up disqus on this side as well.
disqus is out, but we do listen to constructive ideas.
Hi there.
"I hate this" is just not constructive. "I dislike the blue color... it should be much brighter" is actually something we can act on.
Sorry, but we are not ever going back to Disqus. We don't control our data that way and with the FTC looking to crack down on bloggers (and commenters on blogs) trust us, you don't want your data with a U.S. provider anyhow.
Here is wisdom
The land of the Free?
i like what you guys did with removing the boxy feeling of the comments. Asthetically more pleasing
Gives some good reasons why Disqus or similar services should not be used:
http://joeanderson.co.uk/blog/2008/07/22/10-reasons-you-shouldnt-use-dis...
It takes humans, myself included some time to adjust for any changes. So please ignore our rumble.
However adding blue outline from all of the sides, top and bottom might make it easier to focus on the main section.
Music was great the other night, many thanks.
layout and comment system works for me
Here's constructive: get rid of the left column, it is almost empty anyway.
There's still many ppl out there with browser tabs less than 1280 wide.
Sorry. I think we're stuck with the left col.
I assume "stuck" means you want to keep the left col's content. Solution:
1. Move "User login" to the top left in the page header
2. Move "Navigation" to right column above "Search"
3. Move left column advertisement pane to the right column, put below "Active Forum Topics"
4. Delete left column
End Result: site readability and aesthetics UP. Annoying and distracting comments pertaining to this amazing site's layout DOWN.
-chris
Second
okok, disqus gone...it would be nice if at all possible to incorporate some of its more community friendly aspects
Fishy deal, but Centerbridge track record weak.
> iii) the stock will pop tomorrow only to crash to zero ala GM soon enough
Yes, but as long as you're out by the end of the week, there's money to be made. See what happened to CIT yesterday and AIG last week?
I sure hope it pops, im ready to ring the register.
I'm addicted to ZH. And I want to test my avatar.
I think the comment system is okay, maybe tightening the spaces between posts would be good. Seems to be some wasted space that just increases scroll time.
Re:Story >> I am Jack's complete lack of surprise. Galt's Gulch anyone?
Second that... there is quite a bit of wasted screen estate between posts.
What's the market doing on the CIT deferment.
Anybody else wonder why CIT lost more money in 2002, their first year public (brought public by Goldman) than in 2008 prior to the collapse in their stock?
It suggests accounting needs cleaning up.
CanadianInvestors.com
cit is saved. Will the stock pop $1? this could be big
The CIT stock is already rip-roaring in the European markets.
Expect all around Kool-aid today in the media today come NY afternoon.
Currencies are already on the tear.
>>>from wsj
Another advantage for the CIT bondholders lending the money is that they hold large chunks of bonds that come due in the next few months and will see that debt paid off in full, even if they bought it at a steep discount recently, while also being paid high interest on their loans. Rival bondholders said they had also tried to cut a deal with CIT, but never really got time with the company.
so basically holders of aug bond screwed everybody else - got paid cash and took out the best collateral. all the bond curve is 5-9pts higher today, one of those cases when it doesnt really matter what news mean and u just HAVE TO buybuybuy.
Well I am glad I bought 2,000 shares (~$800) of CIT as a purely speculative bet on Thursday. I couldn't imagine Obama spouting off about how he is all about helping the small business and then allowing one of the biggest Banks for small businesses to fold. If I recall correctly PIMCO is one of Obinhood's biggest Treasury Bond market makers and I see the "rescue" of CIT being done at the quiet bidding of the administration...though I could be wrong...
-Silence
The feast of the Gerberviores is set to continue.... The only question remaining is; Is the flavor of the day going to continue to be Banana or will it be switched out for Sweet Potatoes?
GS came out with new year end S&P target. Not sure if it was AJC but looks like magic number has been increased to 1060. Who the hell knows why the increase. Perhaps, because of Kneales timely "the recession is over call".
With CIT teetering on the edge of bankruptcy last week, the market was up 7%. So now that CIT has avoided bankruptcy it makes perfect sense that we have a "rebound".
L+1000 is a great cost of capital. i expect them to make lots of money on it. if they go to iraq maybe.
I still expect CIT to go Bankrupt...just not in the next 90 days. About the same time BAC, Citibank does as well.
-Silence