DebtWire Reports CIT Bondholders Push For More Equity During Call

Tyler Durden's picture

CIT bondholders are starting to disagree on who gets the spoils. This is not very surprising, seeing how they have little (read no) downside to their existing bargaining position. Either way, in today's call hosted by Little Bear Investments, the bondholders are standing firm on their bargaining position. As reported by DebtWire:

During the call, participants discussed the possibility of reaching out to CIT to negotiate a higher equity consideration, said the sources. The group also broached the potential of pushing for a contingent value payment, according to the sources.

The contingent value payment would be structured as a tradable security that functions much like management bonus pool, with holders receiving payments if CIT meets certain corporate performance hurdles, said the sources.

Just in case there was any doubt how politically correct the bondholders are, especially for a firm that has implicit taxpayer backing in it, $2.3 billion worth of in fact, and lest Little Bear is seen as an entity impeding the "pursuit" of taxpayer interests (see Perella Weinberg and Chrysler, and what happened there), here is the generic disclosure that will now accompany each and every soon to be bankruptcy in which the government has a stake:

Call participants said they support CIT's efforts to restructure debt via a bond exchange, and prefer the company restructures outside of bankruptcy, said the sources.

Yet here is why these "efforts" are doomed to fail: any time new negotiating positions come to the bargaining table, you can be sure that unless Steve Rattner is there doing the "negotiating", no out of court consensus can be reached, especially when the pie is as large and as ripe for the taking, as CIT.

The committee will select seven or eight bond holders to form an executive committee that will negotiate directly with CIT and its representatives, said the sources. To serve on the executive committee, members must meet a certain minimum holding size threshold and sign confidentiality agreements, they said.