Tuesday, CIT Group Inc. (CITGQ.PK), a company which provides finance to small businesses and middle market companies, announced that its prepackaged plan of reorganization was confirmed by the United States Bankruptcy Court for the Southern District of New York. The company also indicated that it expects to emerge from bankruptcy on December 10. The reorganization will restructure the company's debt and streamline its capital structure.
"CIT's successful emergence establishes a strong foundation for the future of the Company," said Jeffrey Peek, chairman and chief executive officer." According to him, due to the overwhelming support for the plan, CIT now has a stronger capital structure and improved liquidity profile. The company's Board of Directors and management team now have the time and flexibility to execute the balance of CIT's restructuring strategy, including maximizing the value of its existing assets and optimizing the business model.
On October 30, the company entered into a restructuring plan support agreement with billionaire financier Carl Icahn to support its restructuring plan and secured an incremental $1 billion committed line of credit from Icahn Capital L.P. to provide supplemental liquidity besides announcing a $4.5 billion expansion facility on October 28.
According to the company, which has more than $60 billion in finance and leasing assets, implementing the reorganization plan reduces its total debt by approximately $10.5 billion while deferring debt maturities for three years besides enhancing capital ratios to levels that exceed regulatory requirements. CIT added that with its strengthened financial position, it will aim to restructure the business and execute a smooth leadership transition.
CIT said that it continues to make progress on the reconstitution of its Board of Directors. Ultimately, CIT's new board will consist of 13 directors, including seven new independent directors identified by its debtholders, five continuing directors and the new CEO.
The company had reported previously that it has engaged Spencer Stuart, an internationally recognized search firm, to assist in identifying, interviewing and selecting the Lender Steering Committee director nominees. The search for a new CEO continues.
CIT said that upon emergence, it is committing $500 million to support its Small Business Lending group to fund government guaranteed loans in the Small Business Administration or SBA 7a and 504 lending programs, as well as $1 billion in funding for its Vendor Financing operating segment. These commitments are in addition to the previously announced $1 billion in funding for its Trade Finance operating segment, which provides factoring services for mid-sized businesses. The company also expects to generate new loans across its other lending and leasing platforms in 2010.
For more than 100 years, the New York City-headquartered company has provided capital to small business and middle market customers, both of which are vital to the US economy and represent more than 90 million jobs.
The company said that under the terms of the restructuring plan, its existing common and preferred stock, along with all non-reinstated debt, will be cancelled effective upon consummation of the plan, and distributions of new debt and equity securities will occur as soon as practicable thereafter.
CIT said that its new Common Stock will be listed on the New York Stock Exchange under the ticker symbol "CIT". The company expects the stock to begin trading on the exchange upon the plan's consummation. In aggregate, it will issue 200 million shares of new Common Stock to eligible debt holders in exchange for their claims against the debtors.
The company said that payments on reinstated debt and other unimpaired claims that were stayed during the Chapter 11 cases, will be made as soon as practicable after emergence and that new debt securities issued under the plan will begin to accrue interest on the emergence date.
Evercore Partners and FTI Consulting are CIT's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel in connection with the restructuring plan and Chapter 11 cases. Sullivan & Cromwell advised CIT's board on the restructuring plan and will act as special counsel to CIT going forward on certain corporate matters. Houlihan Lokey Howard & Zukin Capital, Inc. serves as financial advisor, and Paul, Weiss, Rifkind, Wharton & Garrison LLP serves as legal counsel to the Lender Steering Committee.
CITGQ is currently trading on the New York Stock Exchange at $0.0750, down $0.0784 or 51.11%.
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