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Ichan Offers CIT Group a $6 Billion Lifeline

Travis's picture




 

This loan would allow bondholders to avoid voting for a revised debit exchange offer CIT propsed late last week, that, Ichan views favors large bagholders, um..  bondholders. 

CIT is trying to reduce it's near-term debt burden by $5.7 Billion as it fends off collapse.

 

 

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Mon, 10/19/2009 - 10:59 | 103315 Cheeky Bastard
Cheeky Bastard's picture

ok, i had my doubts before, but this is it; Ichan has officially lost it ... this is the exact same situation like it was with WAMU when some guy ( please if anyone knows who, let me be reminded ) invested 2 billions, just to see it have " aaaaaaaaand; its gone " moment a month later. 

Mon, 10/19/2009 - 11:08 | 103323 Anonymous
Anonymous's picture

Not to mention the 7 billion some PE group threw at WM.

Mon, 10/19/2009 - 11:14 | 103329 ghostfaceinvestah
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That was David Bonderman with TPG.  The amazing thing about that situation is, his firm invested something like $1.5B, as lead investor of a group that put in $7B.  So he lost 1.5B of his investors' money, and 5.5B of other investors' money.

That was 6 months before WM collapsed.

Mon, 10/19/2009 - 11:18 | 103332 Cheeky Bastard
Cheeky Bastard's picture

thank you GFI; i might have missed the name of the investor, the amount in question and the time frame, but you know what i mean. Ichan will experience the same thing. He probably plays the old VC game, but with a listed participant, hoping he would get a 1000% return. Not.Gonna.Happen.

Mon, 10/19/2009 - 12:27 | 103434 Anonymous
Anonymous's picture

You notice, he didn't write the check. He may have bought some paper from one of these smaller bondholders and now threw in a hand grenade, lifted the price of the paper he already owns and sells it out, then withdraws the offer.

Mon, 10/19/2009 - 11:02 | 103317 ZeroPower
ZeroPower's picture

I disagree, this might be more like the case of Citi, where that Saudi prince invested his x Billions and clearly, it is still here, and probably will not go bankrupt due to the many printing presses keeping it afloat.

Mon, 10/19/2009 - 11:07 | 103319 Cheeky Bastard
Cheeky Bastard's picture

in this climate, i don't think so. the situation in the early 90's was quite less severe than it is now, and bin-Talal didn't gamble shit when he put the 600 million in CITI, it was a money laundering thing he needed to do to make the money clean so it could not be traced back to BE Aero. He just got lucky. 

Mon, 10/19/2009 - 11:35 | 103361 Careless Whisper
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I have no idea what Icahn is really up to but I certainly wouldn't underestimate him. 

Mon, 10/19/2009 - 11:44 | 103369 ghostfaceinvestah
ghostfaceinvestah's picture

That's what everyone said about Bonderman when he put $1.5B into WM.

Mon, 10/19/2009 - 11:50 | 103380 Anonymous
Anonymous's picture

At least when they fail they can pay back Goldman Sachs before TARP
with Carl's billions

Mon, 10/19/2009 - 11:53 | 103385 Anonymous
Anonymous's picture

Are you guys really not smart enough to realize the difference between Bonderman's equity investment and Icahn's offer to provide debt financing?

For a group of people who so pride themselve on quality and accuracy of information (ZH readers/commenters) you guys are really missing the boat here. Typical really.

Not saying Icahn's proposal is good (or will even go through), but it is unfair to compare with TPG's investment in WaMu.

Mon, 10/19/2009 - 20:00 | 103893 peterr (not verified)
peterr's picture

Looks like the old buy and hold rule went the way of the telephone booth.

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www..
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Mon, 10/19/2009 - 12:09 | 103409 Lycurgus
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Anyone have more details on the offer?  Icahn may simply trying to be first in line on a claim of CIT's assets when it eventually goes bankrupt

CIT is ultimately a lost cause because it lends money to some of the riskiest retail groups who are really struggling.

The added liquidity will only prolong their bankruptcy for another 6-9 months at best.

The consumer isn't coming back.

 

Mon, 10/19/2009 - 12:12 | 103413 Cheeky Bastard
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i have no idea, but it might be something like Buffett did with GS and GE, and i dont know if its worth 6 billion just to be first in line.

Mon, 10/19/2009 - 12:34 | 103445 Lycurgus
Lycurgus's picture

I read in an article on yahoo finance last week that CIT's assets were valued at $30 billion (not certain how accurate this really is).  This makes me suspect that Icahn is looking for a place at the feeding trough when things get sour...

Details of the loan agreement would clarify his motivations.

Mon, 10/19/2009 - 12:56 | 103473 Careless Whisper
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Maybe he just wants an inside look at the books. He's an expert at bankruptcy law and maybe that's where he will make his real move.

Mon, 10/19/2009 - 13:01 | 103479 Cheeky Bastard
Cheeky Bastard's picture

yes, but that would mean that he would get a minimum of 20% + premium on CIT assets and that ALL the other debt and bond holders will have to split the rest. i really dont think that Ichan is really that optimistic. Maybe he is just a moron ( many billionaires are; i point you to a certain Ted Turner ); i mean he did invest in YHOO. I mean, come on, YHOO.

Mon, 10/19/2009 - 12:12 | 103412 E pluribus unum
E pluribus unum's picture

It's been my experience that when this many whores gather in one place that 1) there's money involved 2) someone's going to get fucked.

 

Somehow, someway I have a feeling it's the US taxpayers

Mon, 10/19/2009 - 13:05 | 103487 Rainman
Rainman's picture

Agreed. I seem to recall the WH announcing a small business lending initiative amounting to many billions. I thought it was suspicious, coming right on the heels of Pimco's refusal to play ball on the bondholder's re-write.

CIT could be in line for an FHA-like guaranteed line and rescue package for small business.

Joe Taxpayer meet Pimp Daddy.

 

 

 

 

Mon, 10/19/2009 - 12:24 | 103431 Steak
Steak's picture

So if my understanding is correct another $6 billion just jumped infront of equity holders.  So last in line to get paid just got pushed even farther back.  Isn't this just a hair removed from a DIP loan?  And the equity is up?

I know, short squeezes, HFT, the general dash for trash can explain the move.  But people bidding up CIT today, surely you can't be serious.

http://www.youtube.com/watch?v=f7nuZ825nxE

Mon, 10/19/2009 - 13:07 | 103488 Anonymous
Anonymous's picture

Here's some color I found courtesy of Briefing.com:

"Icahn confirms he sent a letter to CIT's
Carl Icahn sent a letter to CIT's board of directors claiming that the company is "shamelessly offering certain large unsecured bondholders the opportunity to purchase $6 billion in secured loans in the company at well below fair market value."

The largest holders will be given that right at the expense of thousands of smaller bondholders who will not be given the same opportunity.

However, in order to purchase the undervalued loans these bondholders will be required to vote in favor of the company's proposed Exchange Offer and/or its Plan of Reorganization.

Mr. Icahn stated that "this is reminiscent of the old Tammany political machine's vote-getting tactics."

Icahn stated that the existing Board of CIT, which has reigned over its ruin, is proposing a Plan of Reorganization which is designed to keep the existing regime and its handpicked successors in control of a reorganized CIT in the future as well as giving the Board releases against certain claims that shareholders and bondholders would have against them.

As an alternative, Icahn has offered to underwrite a $6 billion loan which would save the company as much as $150 million in fees to prospective lenders under the company's proposed financing. More importantly, Icahn's offer would not force bondholders to vote for the current plan which Icahn claims would entrench current board members and give them releases for a range of past acts. Mr. Icahn stated in the letter that if the Board did not wish to work with him on his offer to underwrite the $6.0 billion term loan because of his "strained relationship" with the company, he is certain that there are other banks who would be eager to underwrite the financing, with large savings to CIT, as long as there is not a vote-buying condition."

http://finance.yahoo.com/marketupdate/inplay#fast

Mon, 10/19/2009 - 20:01 | 103892 peterr (not verified)
peterr's picture

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news

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