Lender CIT Gets Cash From Bondholders
LINDA WERTHEIMER, host:
The big commercial lender CIT confirmed last night that it has struck an agreement with major bondholders. CIT was headed for bankruptcy, but bondholders agreed to give CIT a $3 billion emergency loan.
NPR's Jim Zarroli has more.
JIM ZARROLI: The company said a group of private bondholders had agreed to give it cash, although it will have to pay a hefty interest rate of 10 and a half percent. It also said it would try to alleviate some of its large debt burden by offering to buy back some of its notes at reduced rates. CIT said in a statement that it believes the moves will allow it to better position itself for the future. CIT lends money to almost a million small and midsized businesses, but it got into trouble because of its involvement with student loans and subprime mortgages. It got $2.3 billion from the government's Troubled Asset Relief Program last fall.
Last week, the Treasury Department said it had turned down CIT's request for additional money. That forced the company to turn to its largest bondholders for help. CIT is not out of the woods yet. It still needs permission from regulators to transfer some of its assets from a holding company to its bank in Utah. CIT also has to restructure billions of dollars in outstanding debt. That includes a billion dollars due next month alone.
Jim Zarroli, NPR News, New York.