CIT Group Bondholders Should Sell, CreditSights Says (Update1)

[Nikki Stone1]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aU1Mt.4LVhpc

"Oct. 5 (Bloomberg) -- CIT Group Inc. bondholders should sell their investments as efforts by the 101-year-old commercial lender to restructure have “very little hope of succeeding,” according to CreditSights Inc.

CIT Chief Executive Officer Jeffrey Peek is seeking to cut at least $5.7 billion of debt through a swap of unsecured obligations for preferred shares and new secured notes maturing later. The New York-based commercial finance company is also asking creditors to approve a pre-packaged bankruptcy if it misses the exchange target.

Bond and credit-default swap prices for CIT show that investors are speculating the offer to exchange about $29 billion of its debt won’t prevent it from filing for bankruptcy. The company is seeking to restructure after being blocked out of the unsecured debt markets it relies on for funding and nine quarters of losses totaling more than $5 billion.

“Currently CIT’s interest expense is too high, it cannot borrow economically to fund new business, and its liquidity is stressed,” CreditSights analysts Adam Steer, David Hendler and Jesse Rosenthal in New York wrote in an Oct. 4 report. “After digging through the details of the exchange offer and subsequent liquidity plans, we believe CIT’s plan has very little hope of succeeding.”

CIT bondholders will receive between $700 and $900 of new debt plus between 0.41 and 3.26 of new preferred shares for every $1,000 of existing debt tendered, the company said in a Securities and Exchange Commission filing on Oct. 2...."