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CIT Obtains $4.5 Billion Revolver, Locks Out Icahn

Courtesy of Tyler Durden

The CIT soap opera is developing by the minute, ahead of tomorrow exchange offer deadline expiration. In one corner shunned distressed investor Carl Icahn, who presumably owns $2 billion of CIT bonds, and is pushing for a complete shakedown at the company while offering to pay bondholders 60 cents on the dollar in order to vote down the proposed prepack plan. In the other corner is management, directors, secured lenders and some creditors, who are hoping against hope that by adopting the administration’s broad practice of extend and pretend, everything will be ok. The latest gimmick pulled out of the hat: a new $4.5 billion credit facility.

Reuters reports:

Struggling commercial lender CIT Group Inc said on Wednesday it obtained $4.5 billion more of financing from its creditors, just as it seeks to complete a debt exchange.
The new financing, which adds to a $3 billion loan arranged in July, is being provided by a group of lenders including some of CIT’s bondholders, the company said in a statement.
The funds will be secured by much of the same assets as the original $3 billion loan, according to the statement.
CIT said it made these arrangements after it was unable to determine whether billionaire investor Carl Icahn, who offered to provide the company with a $4.5 billion term loan on Tuesday, had arranged sufficient funding.
The 101-year-old lender is battling to restructure its debt by getting debtholders to exchange their notes, or by agreeing to a prepackaged bankruptcy plan.

While certain to infuriate Icahn, who after vacating his Yahoo board seat has much more time to allocate to this partciular pursuit, the loan procurement has in no way made the exchange offer passage a done deal. As Egan-Jones reported yesterday, the best optionality for creditors is to enforce a free-fall chapter 11 (basically Chapter 7) where the rating agency sees 90 cent recoveries. With about 24 hours to go before the final outcome is made clear on both the exchange offer and the prepack initiatives, it appears that at least one part of the Club CIT “pretending” game is about to be resolved.


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