CIT Group ( CIT) confirmed it has secured a $3 billion loan facility from a group of the commercial lender's major bondholders. The $3 billion secured term loan has a 2.5-year maturity, which is "intended to provide CIT with liquidity necessary to ensure that its important base of small and middle market customers continues to have access to credit," the company said in a statement late Monday. CIT said term loan proceeds of $2 billion are committed and available immediately, with an additional $1 billion expected to be committed and available within 10 days. The short-term financing comes at a high price -- an interest rate of about 10.5%, reports the Associated Press and other media outlets. The lifeline for CIT aims to sustain the company long enough for it to rework its heavy debt load, which includes $7.4 billion due in the first quarter of next year. It doesn't guarantee CIT will avoid bankruptcy. CIT also said it intends to begin a restructuring of its liabilities to "provide additional liquidity and further strengthen its capital position." CIT said it has launched a cash tender offer for its $1 billion worth of outstanding floating rate senior notes due Aug. 17, offering $825 for each $1,000 worth of notes tendered on or before July 31, and $800 for notes tendered between Aug. 1 and Aug. 17. Lenders involved in the bailout deal have agreed to tender all of their Aug. 17 notes, CIT said. The company and the steering committee of bondholders will work on the balance of the recapitalization plans, which is expected to include a series of exchange offers.
"With today's announcement, our board of directors, management team, advisors, and a steering committee of bondholders, who are lenders under the term loan financing, are now actively focused on a restructuring plan that will better position our company for the long term," said Jeffrey Peek, CIT chairman and CEO, in a statement. CIT was negotiating with six key bondholders, including bond manager Pimco, AP reports. Peek was actively involved in the talks, according to a person briefed on the matter. CIT had been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company. Rescue talks with government regulators broke off late Wednesday after days of round-the-clock negotiations. CIT received $2.3 billion of bailout money from the U.S. government in December, money that could be lost if it were to file for bankruptcy.