CIT posts loss, tenders $1 billion in debt
The struggling corporate lender buys time with a debt exchange, vows to avoid bankruptcy even as losses mount on bad loans.
NEW YORK (Reuters) -- CIT Group Inc., a cash-strapped corporate lender scrambling to stay afloat, on Monday reported a second-quarter loss and said it continues to pursue a turnaround plan outside of bankruptcy court.
Earlier Monday, CIT completed a tender offer for $1 billion in debt maturing today, buying time to restructure its finances and stave off bankruptcy. The company had said it could be forced into bankruptcy if the tender failed and it was unable to secure alternative financing.
CIT recorded a net loss attributable to common stockholders of $1.68 billion, or $4.30 a share, narrowing from a loss of $2.08 billion, or $7.88 a share, in the year-earlier period, according to a regulatory filing that was nearly a month late.
Analysts on average had expected an operating loss of $1.88 per share, according to Reuters Estimates. Last month CIT warned investors it expected a second-quarter loss of more than $1.5 billion.
During the quarter, net credit losses surged to $355.9 million, compared with $87 million a year earlier.
CIT also disclosed it recorded a pretax goodwill impairment charge of $567.6 million. As of June 30, the company had no goodwill or intangible assets remaining on its books.
CIT group does not expect to report a profit during 2009, with margins squeezed by bad loans.
New York-based CIT, which last month secured a $3 billion emergency loan from bondholders, has been battling to restructure its debt and avoid bankruptcy. CIT needs creditors to approve a restructuring plan by Oct. 1 under the terms of the loan.
Shares of CIT, which closed down 3.6% to $1.36 in regular trading Monday on the New York Stock Exchange, rose 2.2% to $1.39 in after-hours trade.
CIT said 59.8% of the $1 billion floating rate notes eligible for the tender were offered at a purchase price of $875 per $1,000 in debt. CIT will repay notes that weren't tendered in the offer at their full value.
In its second-quarter filing, CIT said it wants to repair its finances outside of bankruptcy court. CIT expects to begin executing a restructuring plan before Oct. 1, and said it needs to postpone some debts and possibly raise cash from asset sales.
CIT in the filing acknowledged it may still be forced to seek bankruptcy relief if the restructuring plan fails.
Concerns over CIT's health have grown since the lender to small and medium-sized companies, which became a Fed-supervised bank holding company in December, failed to receive further government assistance under the FDIC's Temporary Liquidity Guarantee Program.
Last week, the U.S. Federal Reserve ordered CIT to submit a plan for raising capital and meeting debt obligations within 15 days. CIT (CIT, Fortune 500) agreed that within 60 days it would outline how it will manage credit risk and review its system of setting aside money for loan and lease losses. 
