CIT further extends exchange offers for notes, gets initial OK to participate in TARP

By Angela McDaniels

Tacoma, Wash., Dec. 23 - CIT Group Inc. extended its exchange offers for some of its notes to 5 p.m. ET on Dec. 23 from Dec. 22, according to a statement released Tuesday.

The company also announced that it received preliminary approval from the U.S. Treasury to participate in the Troubled Assets Relief Program's Capital Purchase Program. The Treasury has preliminarily approved an investment of about $2.33 billion in CIT's perpetual preferred stock and related warrants.

The Commissioner of the Utah Department of Financial Institutions also approved the application of CIT Bank to convert from a Utah-chartered industrial bank to a Utah-chartered bank.

The company is offering to exchange up to $1.7 billion of some outstanding notes for up to $550 million in cash and up to $1.15 billion principal amount of newly issued 12% subordinated notes due 2018.

When the offers began on Nov. 17, the company planned to pay up to $350 million in cash and issue up to $1 billion of the 12% notes in exchange for up to $1.5 billion of outstanding notes. It increased the offers on Dec. 2 in response to the amount of tenders received during the early delivery period.

The exchange offers - in addition to an exchange offer for the equity units related to its mandatory convertible senior notes - are the primary part of CIT's plans to raise roughly $1.4 billion of regulatory capital to support its application to become a bank holding company.

On Dec. 17, the company said $2.34 billion of notes had been tendered under the offers and estimated that this would generate $1.15 billion in regulatory capital.

In addition to the exchange offers for the notes and units, CIT previously said it plans to raise the remaining amount of required capital through a public or private offering of capital stock that would qualify as tier 1 regulatory capital.

On Tuesday, the company said a $300 million offering of common stock was slated to settle that day.

CIT anticipates that this capital-raising plan, in combination with the Capital Purchase Program, will provide enough capital to exceed the regulatory requirements.

Notes eligible for exchange are the company's $500 million 5.4% notes 2012, $2 billion 7.625% notes due 2012, $500 million 5.4% notes due 2013, $750 million 5% notes due 2014, $750 million 5.125% notes due 2014, $750 million 5% notes due 2015, $750 million 5.4% notes due 2016, $750 million 5.85% notes due 2016, $750 million 5.65% notes due 2017, $500 million 5.8% notes due 2036 and $500 million 6% notes due 2036.

Holders who participate may elect to receive either new notes or a combination of new notes and cash. The offers will be subject to proration.

Holders who tendered by 5 p.m. ET on Dec. 1, the early delivery time, will also receive $50 principal amount of new notes for each $1,000 principal amount of old notes tendered.

The new notes are being offered only in the United States to qualified institutional buyers and outside the United States to non-U.S. persons who are "non-U.S. qualified offerees."

The offers are subject to conditions that include the approval by the Board of Governors of the Federal Reserve System of CIT's application to become a bank holding company and a financial holding company and the Treasury's commitment to purchase CIT senior perpetual preferred stock under the Capital Purchase Program.

The New York-based commercial finance company said it cannot assure that it will obtain approval to become a bank holding company or a financial holding company or that any of the investments described above, including the exchange offers, will be completed.

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