Closely-watched century-old lender CIT Group Inc. offered up a plan late Thursday night that has salvaged its operations, at least for now, slicing $5.7bn away from its debt obligations by turning control over to its creditors in a sweeping debt swap. The deal, according to The Wall Street Journal, means long-term and short-term bondholders will now be at odds with one another for control. Sources told the newspaper that some of the firm's current board members will also be replaced in the new restructuring plan, although successors for the board haven't been identified.
A new battle begins for the company's bondholders now, which hold about $31bn in debt. If the majority of creditors holding bonds maturing from 2009 to 2012 fail to reach terms, the plan could fall apart and the company will seek bankruptcy protection, it said in a statement.
The plan ends months of uncertainty about CIT's future, and hopefully allays fears for the retail industry. CIT lends to some 300,000 retailers and apparel firms, acting as an intermediary financier along the supply chain. In all, the company is said to service 1 million medium to small-sized businesses. (stylesight)