CIT Bond Advisers Push Bankruptcy: Report

Advisers to the bondholders that rescued commercial lender CIT Group ( CIT) with a $3 billion loan are recommending creditors push the company into Chapter 11 bankruptcy after a debt swap next month, Bloomberg reports, citing a person familiar with the matter.

The lenders should require CIT to restructure its debt through a so-called pre-packaged bankruptcy, even if CIT succeeds in swapping 90% of the $1 billion of floating-rate notes that come due Aug. 17, said Jeffrey Werbalowsky, CEO of bondholder adviser Houlihan Lokey, the person said, Bloomberg reports.

CIT earlier this week said it 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.

CIT Group secured the $3 billion loan facility from a group of its major bondholders, allowing the lender to stay out of bankruptcy for the time being. The loan aims to sustain the company long enough for it to rework its heavy debt load, but doesn't guarantee it will avoid bankruptcy.

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