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CIT Group Prices $1.5 Billion Stock Offering

The commercial financier plans to issue common and noncumulative, perpetual convertible preferred stock.
Author:

Updated from Monday, April 21.

CIT Group

(CIT) - Get Report

on Tuesday priced $1.5 billion in concurrent common and preferred stock offerings.

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The commercial financier said it would offer 91 million shares of common stock for $11 a share and 10 million shares of noncumulative, perpetual convertible preferred stock, with a liquidation preference of $50 a share. The offering is the latest by a cash-hungry financial firm that seriously dilutes existing shareholders.

The common stock offering is expected to raise $951 million after underwriting commissions and expenses, or $1.1 billion if underwriters exercise their full overallotment option to buy additional shares. The convertible preferred stock will raise $485 million, or $558 million if underwriters exercise their full allotment right.

The convertible stock will pay investors cash dividends of 8.75% on a non-cumulative basis each quarter beginning June 15. Each share is convertible at any time to 3.9526 shares of CIT's common stock, plus cash in lieu of fractional shares.

Proceeds from the common shares will be used for payment of $8 million in dividends for outstanding preferred stock in the second quarter; $23 million in outstanding junior subordinated notes in the third quarter; and other general corporate purposes, the company said. The proceeds from the convertible offering will go toward general corporate purposes.

CIT last week

swung to a $257.2 million loss

and slashed its dividend to 10 cents a share, from 25 cents a share. Last month, it drew down on a bank line of credit and the company said it has explored asset sales.

CIT's move makes it the latest among a growing number of financial companies to resort to stock offering dilutive to existing shareholders to raise money. Earlier Monday, Cleveland bank

National City

(NCC)

said it would

raise $7 billion

in a stock offering, following similar capital raising efforts by

Washington Mutual

(WM) - Get Report

and

Wachovia

(WB) - Get Report

.

CIT said it expects to grant underwriters

JPMorgan Chase

(JPM) - Get Report

,

Citigroup

(C) - Get Report

,

Lehman Brothers

(LEH)

and

Morgan Stanley

(MS) - Get Report

an overallotment option to purchase additional shares of the convertible preferred stock.

The stock closed down 5.6% to $12.74 on Monday. In recent premarket action, shares were plummeting 12.6% to $11.13.

This article was written by a staff member of TheStreet.com.