CIT may get $3 billion loan…. the NY Times, WSJ and Bloomberg are reporting CIT will make a statement this evening. The existing bondholders may put up $3 billion to give the company time to carry out a debt for equity swap in a few weeks…. but some sources think that CIT’s problems are much bigger than $3 billion stay tuned
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It appears to be a “done deal”…. the bondholders will put up $3 billion, which just so happens to be the amound they are owed in interest for the rest of the year (We’re going to loan ourselves our own money)…. Kind of like if you were about to be foreclosed on your “under water” mortgage, the bank offers you a 2nd mortgage if you agree to put the money into a special account used only to pay your mortgage for the next year. It’s just continuing the bet that “things will turn around some day”, and digging the hole deeper if it doesn’t. The technical term for this is “putting good money after bad”
Lots of evidence that CIT is still going to go into bankruptcy. The last minute deal’s terms are so horrific that the bondholders are probably better off imploding the company and seeing if anything is left.