CIT Group readies launch of $3 billion term loan for Thursday

By Sara Rosenberg

New York, July 27 - CIT Group Inc. is scheduled to hold a bank meeting on Thursday to launch its proposed $3 billion five-year term loan, according to a market source.

Bank of America, Morgan Stanley and Deutsche Bank are the lead banks on the deal.

Price talk on the non-amortizing term loan is Libor plus 500 basis points with a 1.75% Libor floor and an original issue discount of 98, the source said.

There is call protection of 102 in year one and 101 in year two.

Proceeds from the term loan, along with $1 billion of cash on hand, will be used to repay the company's existing $4 billion in first-lien term debt.

The existing debt is split between a roughly $1.5 billion tranche 1 that is priced at Libor plus 1,000 bps with a 3% Libor floor and a roughly $2.5 billion tranche 2 that is priced at Libor plus 750 bps with a 2% Libor floor.

Lenders under the tranche 1 and tranche 2 are being offered the option to roll into the new term loan, but if they choose not, then the company will get new guys into the deal, the source continued.

Tranche 1 lenders will get a 225 bps fee for rolling into the new deal and tranche 2 lenders will get a 200 bps fee.

Commitments are due on Aug. 5.

Originally, the company's first-lien debt was sized at $7.5 billion, but $750 million was prepaid during the first quarter, $2.3 billion was prepaid during the second quarter and about $450 million was prepaid just after the second quarter ended.

CIT is a New York-based provider of financing to small businesses and middle-market companies.

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