CIT Group amended its restructuring plan in order to gain support from bondholders, the troubled lender announced late Friday. The changes include increased equity shares for bondholders and a shortening of maturities for all new junior debt.
The amended terms of the restructuring plan include a cash sweep mechanism to accelerate repayment of the new bonds, a shortening of the maturities of the new bonds, an increase in the equity offered to subordinated debt holders and the inclusion of notes maturing after 2018, which were not previously considered as part of the exchange.
The changes will also increase the coupon on notes being offered by CIT Delaware Funding to 9% from 7% and give preferred stock holders contingent value rights in the plan of reorganization.
The financing company said its amendments have been approved by CIT’s board of directors and the bondholders’ steering committee. A CIT spokesman declined to comment.
But one notable bondholder was not happy with the deal. Investor Carl Icahn sent a letter to CIT's board of directors offering the company a $6 billion loan as an alternative to the restructuring proposal, which he described as unconscionable. He said his loan would charge half of the fees of the current plan and not require a vote for an exchange offer.
CIT is seeking to reduce its roughly $30 billion in unsecured debt by at least $5.7 billion. Subordinated debt comprises about $1.89 billion of that amount. The biggest group of CIT bondholders, including firms like Centerbridge Partners and Silver Point Capital, is backing the restructuring plan, as is Little Bear Investments, a representative for an ad hoc committee of investors holding about $400 million of CIT subordinated bonds. CIT said last Monday that its chief executive and chairman, Jeffrey Peek, will resign at the end of the year (LFN, Oct. 13, 2009).