CIT agrees to $1 billion credit line from Icahn

Could tap funds even if it files for Chapter 11

Clint Engel -- Furniture Today, October 30, 2009

NEW YORK — CIT Group, which could be headed for bankruptcy court soon, said today it has entered into an agreement with investor Carl Icahn for a $1 billion line of credit to use as it pursues its restructuring plans.

The troubled lender to small and midsized businesses, which has solicited bondholder support of both a debt exchange offer and prepackaged Chapter 11 bankruptcy option, said the new line from Icahn Capital LP can be drawn on before Dec. 31, subject to certain conditions, and could be used as debtor-in-possession financing should the company file for bankruptcy protection.

That financing, along with a new $4.5 billion loan announced Wednesday, and other credit sources "will further enhance CIT's liquidity during the execution of its restructuring plan and ensure its ability to serve its existing small business and middle market customer," the company said in a news release.

Earlier this week, CIT rebuffed a $4.5 billion financing offer from Icahn, a billionaire investor and CIT creditor, saying it saw no evidence that Icahn could fund the loan commitment. Icahn said CIT was overpaying for the announced competing credit facility as a way to win favor with existing lenders by providing them millions in related fees.

The deadline for a $30 billion debt swap offer that CIT floated to bondholders last month expired at midnight, and the lender said early today it was still tabulating results.