CIT Group Repays Nearly Half Of First-Lien Debt, Sells Assets

   DOW JONES NEWSWIRES 
 

CIT Group Inc. (CIT) said it repaid nearly half of its first-lien debt, closed about $2.5 billion in new funding facilities and sold about $2.8 billion in assets in the first half of this year.

Chairman and Chief Executive John Thain noted the business lender's "significant progress...in increasing our funding flexibility, streamlining our portfolio and lowering our financing costs."

Founded in 1908, CIT, which makes loans to small and midsize businesses, historically relied on bonds and commercial paper to raise funds, which it then lent out at a higher interest rate, pocketing the difference as income. The weakness of that model was exposed when the credit crisis made it difficult for CIT to raise capital cheaply. Unable to restructure its debt, it filed for bankruptcy-law protection in November.

The bankruptcy court wiped out about $10 billion of CIT's outstanding debt, as well as a $2.3 billion investment from the U.S. Treasury's Troubled Asset Relief Program.

CIT said Thursday that it has prepaid an additional $1.25 billion of its first-lien debt, bringing the amount repaid to nearly half of its first-lien debt; $4 billion remains outstanding.

The company also closed new conduit facilities for its trade finance and U.K. vendor finance businesses, valued at a total of $800 million, that will be used to support its lending to small and midsize businesses. The latter is the company's first conduit facility in the U.K.

As part of its effort to streamline its portfolio, CIT sold about $500 million in corporate finance assets, mostly cash-flow loans. The prices were above the fresh start accounting based book values.

The lender also completed the sale of its Sydney-based Australian and New Zealand Vendor Finance business to the Bank of Queensland Ltd. (BOQ.AU).

It plans to report second-quarter results July 27.

CIT's shares rose 0.8% to $33.51 in after-hours trading. The stock was up 20% this year as of the close.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; [e-mail]