CIT Group, the troubled lender to small to medium-sized businesses, launched a restructuring plan aimed aimed at reducing $5.7 billion in debt. The company warned it could file for bankruptcy if it falls short of that goal.
Under the plan, bondholders will be given the right to exchange their current notes for a portion of a series of newly-issued secured notes and/or preferred shares.
“Through … this plan, whether completed in or out of court, we are very confident that CIT will emerge as a strong bank holding company with renewed earnings and profitability potential,” said Jeff Werbalowsky of Houlihan Lokey, the financial adviser to the bondholders' steering committee, in a statement.
The exchange offers will expire on Oct. 29. The newly-issued bonds will mature within four to eight years, which would give CIT some breathing room as the company's current debt begins to near its maturity date.
If at least $5.7 billion worth of debt is not cleared off its balance sheet, CIT said, it could file for Chapter 11 bankruptcy protection and is asking most bondholders to approve a prepackaged reorganization plan. If that is approved, it would allow the company to quickly exit Chapter 11.
