In the latest sign CIT Group Inc. is struggling to avoid certain bankruptcy, the commercial lender has again sweetened an offer to restructure outstanding debt.
CIT raised the yield and extended the deadline for bondholders of one class of debt to accept the company’s exchange offer, according to a regulatory filing submitted Monday. The company is trying to get bondholders to agree to swap out existing debt for new debt that matures later and some stock.
CIT is likely to file for bankruptcy protection if it is unable to win acceptance for the restructuring plan, which would reduce its near-term debt maturities by about $5.7 billion. Even if it can complete the restructuring, it has warned it still might have to reorganize under bankruptcy protection.
A collapse by CIT, one of the largest U.S. lenders to small and mid-sized businesses, could have a ripple effect throughout an economy trying to regain its footing. It is a short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation.
The latest improved offer increases the interest rate on unsecured Canadian notes to 10.25 percent from 9 percent. Holders of that debt will also have until Nov. 5 to accept the new terms. CIT had previously set a deadline of Oct. 29.
It was the second time CIT sweetened the pot for some bondholders in the past two weeks, hoping to win their approval.
In the filing with the Securities and Exchange Commission Monday, CIT said it is also in discussions to increase a secured credit facility.
Last week, billionaire investor Carl Icahn offered to provide CIT with a $6 billion loan that he said would save the company $150 million in fees and eliminate the need for the debt restructuring.
CIT’s losses have been mounting as its borrowing costs have outstripped its income amid the credit crunch. It received $2.3 billion in federal bailout money last fall and a $3 billion emergency loan in July from some of its largest bondholders.
CIT used to rely heavily on cheap, short-term debt to fund its operations — a type of funding that essentially evaporated during the peak of the credit crisis last year. Its precarious future has kept it from finding new funding sources.
Shares of CIT fell 7 cents, or 6.1 percent, to $1.07 in afternoon trading.
