US$6 billion loan offered to CIT by investor
(21 October 2009 – USA) An American billionaire financier, Carl Icahn has offered a US$6 billion (A$6.47 billion) loan to failing Commercial Investment Trust (CIT) bank to avoid bankruptcy.
The bank was denied a bail-out by the US government earlier this year and Mr Icahn said that the offer was an alternative to the debt restructuring plan which he believes favours large bondholders.
The CIT bank put forward a debt restructuring plan in early October to exchange notes and concurrently began a solicitation for votes for a voluntary pre-packaged plan of reorganisation to generate multi-year liquidity.
Mr Icahn argued that his loan would save the bank US$150 million in fees and that the bank’s existing fundraising plan undervalued the firm and would see smaller investors lose out.
But Michael Gallo, of the law firm DeCotiis, FitzPatrick, Cole & Wisler, told the BBC news that a loan from Mr Icahn may not be particularly effective.
The whole intent of the debt restructuring is to reduce debt, Mr Gallo highlighted.
I believe replacing a loan with another loan doesn't really do it, it is just forestalling the inevitable, Mr Gallo added.
CIT is one of the countries largest lenders to small and medium sized retailers; if the bank goes into bankruptcy it would remove a key source of credit for thousands of companies.
The CIT bank put forward a debt restructuring plan in early October to exchange notes and concurrently began a solicitation for votes for a voluntary pre-packaged plan of reorganisation to generate multi-year liquidity.
Mr Icahn argued that his loan would save the bank US$150 million in fees and that the bank’s existing fundraising plan undervalued the firm and would see smaller investors lose out.
But Michael Gallo, of the law firm DeCotiis, FitzPatrick, Cole & Wisler, told the BBC news that a loan from Mr Icahn may not be particularly effective.
The whole intent of the debt restructuring is to reduce debt, Mr Gallo highlighted.
I believe replacing a loan with another loan doesn't really do it, it is just forestalling the inevitable, Mr Gallo added.
CIT is one of the countries largest lenders to small and medium sized retailers; if the bank goes into bankruptcy it would remove a key source of credit for thousands of companies.
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