CIT should turn into a pumpkin

29 October 2009 By Robert Cyran Follow @rob_cyran

Creditors have until midnight on Thursday to vote on the US smallbusiness lender’s proposals for a debt restructuring or a prepackaged bankruptcy. But CIT has little value as an ongoing business. Creditors would probably do better if it just sells off or winds down its assets.

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Creditors have until 11.59pm on October 29 to vote on CIT's proposals for a debt restructuring or a prepackaged bankruptcy.

The company is offering 70 to 90 cents on the dollar plus equity to senior lenders in a debt exchange. If, as is widely expected, the exchange fails to get enough support, CIT is proposing a prepackaged bankruptcy that would come into effect with an lower threshold of acceptance than the debt exchange. Under the prepackaged offer, senior lenders would receive 70 cents on the dollar in new 7% notes and a majority of the company's equity.

If neither of the company's proposed plans achieved enough support, CIT estimates senior unsecured lenders would receive 6 to 37 cents on the dollar in liquidation. However, EganJones, a credit rating service, estimates the return to creditors in a liquidation scenario would be close to 90 cents on the dollar.

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