NEW YORK - July 23, 2009 - Advisers to bondholders that rescued CIT Group Inc. with a $3 billion loan said creditors may push the company into Chapter 11 bankruptcy after a debt swap next month, according to people familiar with the matter.
If the company succeeds in swapping 90 percent of the $1 billion of floating-rate notes that come due August 17, 2009, the lenders should require New York-based CIT to try to restructure out of court through debt exchanges with a pre-packaged bankruptcy option, Jeffrey Werbalowsky, chief executive officer of bondholder adviser Houlihan Lokey Howard & Zukin, said on a call with creditors yesterday, according to one of the people.
A pre-packaged bankruptcy is likely under the plan because it will be difficult to get almost all of CIT’s bondholders to agree to reduce their claims out of court, according to another person familiar with the advisers’ thinking.
Investors led by Newport Beach, Kalifornia-based Pacific Investment Management Co. and Centerbridge Partners LP in New York, are preparing to take more control of CIT, which said in a regulatory filing this week that it may need to file for bankruptcy if it’s unable to exchange the notes. A pre-packaged reorganization could allow the 101-year-old commercial lender to reduce the $7 billion of unsecured debt that matures by July 30.
If the company succeeds in swapping 90 percent of the $1 billion of floating-rate notes that come due August 17, 2009, the lenders should require New York-based CIT to try to restructure out of court through debt exchanges with a pre-packaged bankruptcy option, Jeffrey Werbalowsky, chief executive officer of bondholder adviser Houlihan Lokey Howard & Zukin, said on a call with creditors yesterday, according to one of the people.
A pre-packaged bankruptcy is likely under the plan because it will be difficult to get almost all of CIT’s bondholders to agree to reduce their claims out of court, according to another person familiar with the advisers’ thinking.
Investors led by Newport Beach, Kalifornia-based Pacific Investment Management Co. and Centerbridge Partners LP in New York, are preparing to take more control of CIT, which said in a regulatory filing this week that it may need to file for bankruptcy if it’s unable to exchange the notes. A pre-packaged reorganization could allow the 101-year-old commercial lender to reduce the $7 billion of unsecured debt that matures by July 30.