CIT Group to issue up to $2 billion in new debt to fund OneWest merger

By Lisa Kerner

Charlotte, N.C., July 22 – CIT Group Inc. intends to issue new debt to fund the cash portion of its $3.4 billion cash-and-stock merger with IMB Holdco LLC, the parent company of OneWest Bank NA.

“We plan on issuing unsecured debt between $1.5 (billion) and $2 billion, depending on closing and other cash actions we might be able to generate for that,” said CIT chief financial officer Scott T. Parker during a conference call on Tuesday.

Parker said CIT was looking at a coupon of “somewhere around 4%” and a maturity of seven to 10 years.

Transaction details

Under the terms of the agreement, IMB Holdco LLC shareholders will receive $2 billion in cash and 31.3 million shares of CIT common stock currently valued at $1.4 billion assuming a CIT stock price of $44.33, according to a company news release.

Both companies’ boards of directors have approved the transaction, which is expected to close in the first half of 2015.

OneWest is a privately owned regional bank based in Pasadena, Calif.

“The transaction diversifies and lowers the cost of CIT's deposits, broadens the products we can offer to our middle-market clients, is accretive to earnings and return on equity, and accelerates the utilization of our NOL, while maintaining a strong capital position,” said CIT chief executive officer John Thain.

J.P. Morgan Securities LLC is serving as financial advisor to CIT. Bank of America Merrill Lynch is representing IMB Holdco.

Share repurchases, cash

Also on Tuesday, CIT’s board authorized the repurchase of up to $500 million of common stock through June 30, 2015.

As of June 30, CIT has repurchased $745 million of common stock since May 30, 2013. The company has about $55 million remaining under its previously authorized programs.

CIT ended the quarter on June 30 with cash and short-term investment securities totaling $6.8 billion comprised of $6.4 billion of cash and $400 million of short-term investment securities. The New York-based bank holding company had about $1.4 billion of unused and committed liquidity under a $1.5 billion revolving credit facility at quarter-end, according to a news release.

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