Directors of the CIT Group, one of the nation’s leading lenders to small and midsize businesses, approved a deal Sunday evening with some of the bank’s major bondholders to help it avert a bankruptcy filing through a $3 billion emergency loan, according to people briefed on the matter.

The deal will buy CIT some time to restructure its business model and reduce its voluminous debt load, after the company failed to win crucial concessions from Washington regulators. The company had planned to file for bankruptcy protection as soon as Monday afternoon if it could not attract enough capital from private investors, including big bondholders and its banks.
Under the terms of the deal, CIT would receive $3 billion from some of its main bondholders, though at an initial rate of about 10.5 percent. The money, arranged by Barclays Capital, is meant to give the company several weeks to set up an exchange of bondholders’ debt for equity, alleviating some of the pressure from billions of dollars in obligations.
CIT’s board approved the deal around 10:30 P.M. Sunday, these people said. For more than a week, CIT, which is 101 years old, posed a difficult question for regulators: Should they step in to save yet another foundered financial institution?
Regulators felt some political pressure to intervene, because of CIT’s big presence in lending to small businesses across the country and because the government had already invested $2.33 billion in the company.
But officials eventually concluded that CIT, unlike the banks that were bailed out last year, posed no risk to the global financial system, leaving said. When that door closed last week, CIT executives still held out hope that they would receive approval from regulators to transfer $10 billion in assets to the company’s Utah bank, a move that would have given it access to loans from the Federal Reserve. But regulators demanded that such a move be accompanied by CIT’s raising a significant amount of private capital, which at the time seemed nearly impossible.
(Source: The NYT)