CIT Group on Monday cleared another hurdle in its restructuring effort as it attempts to avoid bankruptcy protection, saying it has received enough offers to complete a debt repurchase program.
The embattled commercial lender, which nearly collapsed last month, said that as of Friday nearly 65% of the $1 billion in bonds due Aug. 17 have been tendered for repurchase. CIT Group has said failing to complete the offer could result in a bankruptcy filing.
CIT cit, which is one of the nation's largest lenders to small and midsize businesses, said it needs 58% of the debt to be tendered for repurchase to complete the deal.
The update on the tender offer comes as CIT also sweetened the offer to buy back the debt. CIT said Monday it is now paying all bondholders $875 for every $1,000 in notes tendered for repurchase.
The New York-based lender had previously offered $825 for every $1,000 in notes tendered for sale by July 31, with the price dropping to $800 for notes offered after Aug 1.
The tender offer was launched last month at the same time CIT received an emergency $3 billion loan from some of its largest bondholders. Those bondholders have all agreed to tender their notes for repurchase as part of the program, which account for about 58% of the outstanding debt.
The lender 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, some experts feared it would deal a crippling blow to an economy still bleeding hundreds of thousands of jobs a month despite a nearly $800 billion federal stimulus program.
The retail sector would be hit especially 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% 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 Federal Reserve put the company through its "stress test" last week and found it faced a $4 billion capital shortfall.