CIT springs eternal

9 December 2009 By Robert Cyran Follow @rob_cyran

The US business lender is set to emerge from Chapter 11 with nearly $11 billion less debt. Yet the company still has to figure out a way to raise funds to make new loans on attractive terms. It may have slashed its debt burden, but its longterm viability still looks uncertain.

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CIT Group expects to emerge from bankruptcy on Dec. 10 after a U.S. bankruptcy court confirmed the finance company's prepackaged reorganization. The plan reduces the financing company's total debt by $10.5 billion while deferring debt maturities by three years.

Existing common and preferred stock will be canceled and existing debt exchanged for new paper. CIT will issue 200 million shares of new common stock to debt holders.

Under the company's agreement with lenders, its board will consist of 13 directors – seven independent directors appointed by debt holders, five continuing directors and the company's new chief executive, who is yet to be named.

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