July 24 (Bloomberg) -- CIT Group Inc., the commercial lender seeking to avoid collapse, may sell units that lease railcars and aircraft to raise cash, said a person with knowledge of its plans. The railcar business is the most likely to be sold, and CIT has identified about a half dozen potentially interested bidders, the person said, speaking on condition of anonymity because the talks are private. No final decisions on which units will be kept or sold have been made, the person said. CIT put the unit up for sale last year, only to take it off the market when bids came in below expectations, the person said. CIT Chief Executive Officer Jeffrey Peek is fighting to keep bankruptcy at bay after lining up a $3 billion rescue loan from bondholders when his normal sources of funding dried up. Denied a U.S. government bailout, the 101-year-old lender is weighing asset sales as it seeks to persuade bondholders to participate in a debt swap next month to reduce its outstanding obligations. Earlier this year, Warren Buffett’s Berkshire Hathaway Inc. and Leucadia National Corp. bid for parts of CIT and were rebuffed, the Wall Street Journal reported yesterday. CIT shares traded at 72 cents in Germany, a 2.7 percent decline on their 74-cent close in New York yesterday. Curt Ritter, a CIT spokesman, declined to comment. CIT funds about 1 million businesses from Dunkin’ Brands Inc. in Canton, Massachusetts, to Eddie Bauer Holdings Inc., the bankrupt clothing chain in Bellevue, Washington. The firm was founded in 1908 and was once known as Commercial Investment Trust. Aircraft Leasing CIT’s railcar leasing operation is the third-largest in the U.S., with over 116,000 railcars, according to CIT’s Web site. The aircraft-leasing business, with about 300 aircraft, is also the third-largest, behind General Electric Co. with 1,500, and the 980 held by International Lease Finance Corp., a unit of American International Group Inc. General Electric offered a loan to CIT of at least $2 billion secured by aircraft, people with knowledge of the matter said on July 21. CIT rejected the offer in favor of the $3 billion loan from a group of bondholders. Before the global financial crisis struck in 2007, CIT relied in part on issuing unsecured debt in the capital markets to fund its operations. That source of funding has dried up, and CIT drew down credit lines from its lenders and became a bank last year in a bid to qualify for federal help. Debt Swap On July 15, CIT said talks with federal regulators had ended without a rescue. Instead, CIT negotiated a $3 billion loan from some of its biggest bondholders to buy time while it tries to restructure its debt outside of bankruptcy. Bondholders including Pacific Investment Management Co. that provided the loan got a 5 percent fee for the first $2 billion of the rescue, and annual interest of at least 13 percent. On top of that, the New York-based company pledged assets worth more than five times the amount of the loan as collateral. In the debt swap, holders of $1 billion of floating-rate notes due Aug. 17 are being asked to accept 82.5 cents on the dollar for the debt. Advisers to the bondholders that provided the financing may push the company into Chapter 11 bankruptcy after the debt swap, according to people with knowledge of the matter. “Plan A is to get the tender offer successfully closed and promptly complete exchange offers out of court,” Jeffrey Werbalowsky, chief executive officer of bondholder adviser Houlihan Lokey Howard & Zukin, said yesterday in an interview. If that fails, “of course we have plan Bs,” he said. The August notes fell below the tender-offer price yesterday, dropping 4.4 cents to 79.4 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. CIT’s $500 million of 4.125 percent notes maturing in November fell 1.5 cent to 60 cents on the dollar, Trace data show. http://www.bloomberg.com/apps/news?pid=20601103&sid=ayDhcHPKxVYQ |
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