•CIT Hit With Interest Rate More Than 25 Times Libor

Discussion in 'Stocks' started by ByLoSellHi, Jul 22, 2009.

  1. kxvid


    Now thats a hard money loan. :)
  2. It's the very definition of loan sharking, if you ask me. I'm more than certain that kneecaps will be broken if they screw anything up...

    Loan term 2.5 yrs.
    $2bn available now, $1bn by month end.
    5% fee ($100mm on the initial $2bn) and LIBOR + 1000bp (with floor at 3% !).
    Collateral valued at 5 x loan value. Thats 500% collateral 1st call pledged..(stated as 5x book value and 3x fair value)
    1% charge on loan amount not drawn upon.
    Penalty for early retirement 2%
    6.5% charge on the amount it wants to retire. The 6.5% declines to zero over 18m.

    Financing for the deal provided by a friendly UK clearing bank, as far as I am aware.
  3. And if you think 25x Libor is bad:

    "CIT, led by Chairman and Chief Executive Officer Jeffrey Peek, said in a regulatory filing yesterday that the loan doesn’t solve the funding challenges and it may be forced to seek bankruptcy protection unless holders of $1 billion in floating- rate notes due Aug. 17 accept 82.5 cents on the dollar for the debt."
  4. Actually, the "25x LIBOR" headline is complete bollox and quite misleading. You can't compares a rate on a 3yr loan with current 3M LIBOR. In reality, it's more like 8 times LIBOR.

    Still, it's one good deal for Pimco et al, one bad deal for CIT.
  5. S2007S


    I think that may be it for

    :( CIT :(
  6. What's the point of this? I mean really, what CEO or business owner with the right set of mind would actually accept this deal? It's a waste of time.

    Oh wait, he gets to collect his salary & fringe benefits a couple years longer, so now it makes sense.
  7. I read that GE wanted to get in on the action but they were told no by CIT. GE was offering better rates.
  8. I wouldn't lend CIT a hammer, let alone 6 billion.
  9. it's the sign of the times in finance. Even excellent credit holders are finding it more difficult to get cheap heavy loans.
    #10     Jul 22, 2009