The CIT Group priced its first home-equity ABS since 1998 last week, two days past the news that the commercial finance company will spin-off entirely from short-time parent Tyco International.
Prior to last week's 10-12B filing with the Securities & Exchange Commission, it was unclear whether the spin-off would be partial, such that Tyco would retain an interest in the finance company, or if CIT would be outright sold to another party.
"This is good news for CIT bondholders, as complete separation from Tyco will eliminate any concerns that the lower-rated Tyco, as a significant shareholder, could have some influence on CIT," wrote credit researchers at Credit Suisse First Boston.
As it stands, both analysts and CIT believe the company will emerge as a single-A-plus credit, with top-tier commercial paper ratings, a significant advantage for a finance company.
Cited from the SEC filing, "While our current long-term debt ratings are A-' and A2' for Standard & Poor's and [Moody's Investors Service], respectively, we expect to operate the company to achieve A+' and A-1' long-term debt ratings and A-1' and P-1' commercial paper ratings in the future."
If anything, the news had a positive impact on CIT's home-equity deal, which priced marginally tighter on the top classes than talk, with the .75-year triple-As pricing at 14 basis points over one-month Libor, in line with GMAC-RFC's subprime RMBS one-year triple-As.
CIT will spin off from Tyco with about $50 billion in managed assets and $4 billion in tangible equity.
Though equity researchers at Merrill Lynch agree that the spin-off will be good for CIT's near-term credit ratings, the bank questions CIT's ability to refinance its debt, over 40% of which matures in the next year.
