SAN FRANCISCO (MarketWatch) -- Some CIT Group Inc. debt holders are considering rescue financing for the troubled lender, according to participants on a conference call organized late Thursday by law firm White & Case LLP.
A small group of investors holding several billion dollars of CIT /quotes/comstock/13*!cit/quotes/nls/cit (CIT 0.38, -1.26, -76.83%) debt has formally engaged White & Case, said Thomas Lauria, global practice head of the law firm's financial restructuring and insolvency group, during the conference call.
The group is willing to put in roughly $2 billion, and White & Case has lined up a bank that has agreed to be the agent for such an investment, Lauria added later in the call.
Separately, The Wall Street Journal reported late Thursday that a group of CIT's "large bondholders" are discussing a plan to exchange $5 billion in debt for equity in the firm -- though it's unclear whether the groups of bondholders overlap. The Wall Street Journal story cited unnamed sources.
Shares of CIT slumped 75% Thursday as investors girded for what may be the fourth-largest bankruptcy in U.S. history after the troubled lender failed to get a government bailout. See full story.
A CIT spokesman didn't immediately respond to an email asking about possible rescue finance and whether the company is meeting its funding obligations.
Some investors on the White & Case call, including David Marshak of Wellington Management, pointed out that CIT has a lot of assets that could be used as collateral to get at least short-term rescue financing, giving the company more time.
"Why are we in the 11th hour?" Marshak asked.
Still, one participant on the call expressed concern that CIT wasn't meeting its funding obligations anymore, which could undermine its credibility.
Lauria said that CIT may be facing a liquidity issue because some of its customers may be drawing down their credit lines. "It's arguably game over -- if word gets out that a lender can't meet its obligations," he commented.
Wellington's Marshak said that some CIT customers may be drawing down their credit lines even if they don't need the cash.
Toward the end of the conference call, Lauria remarked that he planned to contact CIT and one of its main advisers, David Ying, a senior managing director at Evercore Partners /quotes/comstock/13*!evr/quotes/nls/evr (EVR 18.68, +0.09, +0.48%) who is co-head of the firm's restructuring practice.
"I urge your group, if there is a check available, that you be in contact with the company this evening," Ronald Brandon of New York Life Investment Management said on the call.By Alistair Barr, MarketWatch
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