CIT Bankruptcy Looks to be Unavoidable

Can you say, CHAIN REACTION! This is a game changer: "CIT finances about 1 million businesses from Dunkin’ Brands Inc. in Canton, Massachusetts, to Eddie Bauer Holdings Inc., the clothing chain in Bellevue, Washington, that’s operating under bankruptcy protection. The company says it’s the third-largest U.S. railcar-leasing firm and the world’s third-biggest aircraft financier."

CIT Bonds Signal Bankruptcy Inevitable as Debt Exchange Expires

By Pierre Paulden and Caroline Salas

Oct. 30 (Bloomberg) -- CIT Group Inc. bond and credit- default swap prices show that investors are betting the 101- year-old commercial lender will file for bankruptcy after the deadline for a debt exchange expired overnight.

Since CIT Chief Executive Officer Jeffrey Peek started a $30 billion debt swap Oct. 1, the company’s notes due Nov. 3 dropped 12 cents to 68 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Holders of the $500 million in notes were offered 90 cents on the dollar in new debt and equity in an out- of-court exchange that expired at 11:59 p.m. yesterday in New York. They would get 70 cents on the dollar in bonds and new stock in a pre-packaged bankruptcy.

“We believe they will file for bankruptcy within the week, provided nothing unexpected occurs,” Adam Steer, an analyst with CreditSights Inc. in New York, said in a telephone interview before the deadline passed.

CIT, which lost $5 billion in the past nine quarters and failed to get a second round of taxpayer funding in July, sought to avert collapse by asking bondholders to agree to the swap or vote for the pre-packaged bankruptcy. It faces opposition from billionaire investor Carl Icahn, who says he’s the largest bondholder, with $2 billion in debt. If CIT is forced into a “free-fall” bankruptcy, unsecured claims may fetch as little as 6 cents on the dollar, said Peek, who plans to leave the company at yearend.

Keith Rodwell, a spokesman for CIT in Sydney, declined to comment on the outcome of the debt-exchange offer. Curt Ritter, a company spokesman in New York, declined to comment yesterday.

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