(RTTNews) -  Tuesday, billionaire investor, Carl Icahn announced a private tender offer to buy from smaller bondholders certain outstanding notes of the troubled commercial lender CIT Group, Inc. (CIT). The 30 days tender offer at 60% of par value is made to provide downside protection for smaller CIT Group bondholders from the company's pre-packaged bankruptcy plan, according to Icahn.

Under the terms of the offer, if the pre-packaged plan of reorganization/exchange offer currently being proposed by CIT fails, certain of Icahn's affiliated entities will commence a tender offer to purchase for cash certain outstanding CIT notes for a purchase price of $600 for each $1,000 in principal amount of such notes validly tendered. If a broker or financial advisor is acting for the bondholders, they will be paid $5.00 for each $1,000 in principal amount of notes tendered.

Through the offering, Icahn would provide a free put option to small bondholders, assuring them a floor price in the event the notes trade lower, while allowing them to benefit if the notes trade higher, and thus will seek to neutralize the variety of scare tactics designed by CIT to coerce bondholders into supporting the company's plan.

"Smaller noteholders have been disadvantaged by the restructuring process and completely ignored by CIT and its advisors, as well as by those purportedly representing them," said Icahn

According to Icahn the pre-packaged plan being promoted by the the CIT would destroy value at CIT, with the current board retaining control of the company, and must be defeated.

Icahn commented, "It is very important that the smaller holders realize that their vote matters greatly because, under applicable bankruptcy law, CIT's pre-packaged plan, which would entrench the Board at the noteholders' expense, requires, among other things, 50% in number of those voting to approve the plan. This means that whether you own 1 note or 1,000 notes, your vote counts the same in determining whether the 50% in number is achieved."
Earlier on October 23, Icahn issued an open letter to bondholders CIT, urging them not to vote for the Exchange Offer/pre-packaged bankruptcy plan currently proposed by the company. Icahn also suggested reconfiguring the proposed board.

Icahn, CIT's largest creditor, said he is prepared to underwrite a $6 billion loan that would save the beleaguered commercial lender about $150 million in fees.

In October, CIT struggling to avoid bankruptcy filing again, put in place a prepackaged bankruptcy reorganization plan for bondholders to consider and approve, so that it can then decide to initiate a voluntary filing under Chapter 11 of the U.S. Bankruptcy Code, if the company does not achieve the objectives of the debt exchange offers.

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