CIT Sells $3.25 Billion in Biggest Bond Sale Since Bankruptcy

CIT Group Inc. (CIT) sold $3.25 billion of debt in its second and biggest bond sale since emerging from bankruptcy in December 2009 as the small-business lender led by John Thain pays back “high-cost debt” this quarter.

CIT issued $1.5 billion of 4.75 percent, three-year notes and $1.75 billion of 5.5 percent, seven-year debt, both Series C second-priority secured bonds, according to data compiled by Bloomberg. Proceeds may be used to refinance outstanding debt, the New York-based company said in a statement today. CIT “is in the process of repaying $2.5 billion of high-cost debt in the first quarter of 2012,” Thain said in a Jan. 31 conference call, referring to its 7 percent so-called Series A notes.

Thain has sold assets to help CIT, once the biggest independent commercial lender in the U.S., recover from a bankruptcy that wiped out $2.3 billion in government bailout money. In addition to cutting high-coupon debt, CIT “seems to be maintaining cautious credit standards” based on reports it was demanding extra financial information from Sears Holdings Corp. and its lack of European sovereign credit risk exposure, Gimme Credit LLC analyst Kathleen Shanley said in a note today.

“We have eliminated or refinanced about $18 billion of debt” since the start of 2010, Chief Financial Officer Scott Parker said on the Jan. 31 conference call to discuss earnings. “We lowered our funding cost, improved our funding flexibility and are well-positioned to execute the balance of our liability restructuring roadmap.”

CIT is graded B2 with a “stable” outlook by Moody’s Investors Service and B+ with a “positive” outlook from Standard & Poor’s, Bloomberg data show.

Exit From Bankruptcy

The lender plans to redeem the remaining $4 billion of the Series A debt later this year, Thain said on the conference call. The notes have higher costs and restrictions attached to them because they were part of the company’s exit from bankruptcy, Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, wrote in a Jan. 31 note.

“Series C notes remain secured until CIT achieves investment grade by both S&P and Moody’s or once CIT repays all of Series A,” she wrote.

Once the Series A debt is fully repaid, liens on a revolving line of credit and the Series C notes “fall away” so that debt becomes unsecured, Parker said in a Nov. 16 conference call. That’s part of the company’s goal of getting back investment-grade credit ratings, he said.

CIT tapped the debt market for the first time since its bankruptcy in March, offering $1.3 billion of 5.25 percent, three-year notes and $700 million of 6.625 percent, seven-year notes, according to data compiled by Bloomberg.

High-yield, high-risk, or junk, debt is rated below Baa3 by Moody’s and lower than BBB- by S&P.

To contact the reporter on this story: Sapna Maheshwari in New York at

To contact the editor responsible for this story: Alan Goldstein at

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