UPDATE: WSJ: Pimco Has Quit CIT Bondholder Steering Committee
07 Ottobre 2009 - 7:12PM
Dow Jones News
Bond giant Pacific Investment Management Company has sold its
position in a recent emergency loan for CIT Group Inc. (CIT) as the
century-old lender battles to stave off bankruptcy, according to
people familiar with the matter.
The move comes as CIT is struggling to end months of uncertainty
about its future. PIMCO was one of six members of a steering
committee of CIT's largest bondholders that put in place $3 billion
of financing for the company at the end of July.
A provision in the loan agreement requires members of the
steering committee to hold a certain amount the debt, one of these
people said. The amount of the position PIMCO sold triggered that
provision and forced it off the committee, this person said.
PIMCO couldn't immediately be reached for comment.
CIT spokesman Tim Lynch declined to comment on the membership of
the steering committee.
CIT last Thursday announced details of a sweeping debt exchange
aimed at getting holders of about $31 billion in bonds to cut this
debt by at least $5.7 billion and to extend debt maturities. At the
same time, CIT is asking bondholders to vote on a prepackaged
bankruptcy plan.
The restructuring plan was orchestrated by three members of the
steering committee: Oaktree Capital Management, Centerbridge
Partners and Capital Research & Management, people familiar
with the situation said last week. This suggests that PIMCO may
have sold out of its position a few weeks ago.
Under the exchange offer, bondholders would get new secured debt
worth as much as 90 cents on the dollar if they currently own bonds
that mature this year, but would end up with less if they own bonds
maturing later.
Investors have until 11:59 p.m. Eastern time on Oct. 29 to
tender their bonds under the restructuring plan. Earlier Wednesday,
it cost investors $3.8 million upfront plus a $500,000 annual fee
to insure $10 million of this debt, according to CMA DataVision.
That indicates an acute level of distress, and indicates that
bondholders aren't betting that the company will successfully
restructure out of court.
The cost compares with $3.75 million upfront late Monday.
Shares of CIT fell 2 cents to $1.15 in midday trading on the New
York Stock Exchange.
-By Mike Spector, The Wall Street Journal; 212-416-2572;
mike.spector@wsj.com
(Kate Haywood and Joe Bel Bruno contributed to this
article.)