CIT takes steps to avoid bankruptcy filing

/ Source: The Associated Press

Commercial lender CIT Group Inc., which is trying to avoid filing for bankruptcy protection, said Friday that it has received the remaining $1 billion available under a $3 billion credit agreement and is suspending preferred dividend payments.

The company, which is one of the nation's largest lenders to small and midsize businesses, said it will use a substantial portion of the new borrowing to support its small and middle market customers.

Suspending the dividends on four series of preferred stock will improve liquidity and preserve capital during its restructuring, CIT said.

Spokesman Curt Ritter said the company has paid about $50 million in preferred dividends in each of the last four quarters.

The company also reaffirmed that it has received enough offers to complete a debt repurchase program. CIT, which nearly collapsed last month, said earlier this week that as of last Friday almost 65 percent of $1 billion in bonds due Aug. 17 had been tendered for repurchase. The company needed 58 percent of the debt to be tendered for repurchase to complete the deal. The tender offer expires on Aug. 14.

The tender offer was launched last month at the same time CIT received the emergency $3 billion loan from some of its largest bondholders. CIT turned to, and received funding, from its bondholders only after days of round-the-clock negotiations for a government-led bailout failed.

If CIT collapsed, the retail sector would be hit particularly hard. CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing.

CIT received $2.3 billion from the government's Troubled Asset Relief Program last fall — money that could be lost if CIT files for bankruptcy.

The company had nearly collapsed last month under a heavy debt load.

Shares of CIT Group rose 7 cents, or 4.3 percent, to $1.69 in morning trading. The stock has traded in a range of 31 cents to $13 over the past year.