Billionaire investor Carl Icahn offered Tuesday to buy bonds from CIT Group Inc.'s smaller bondholders at a discount as he tries to thwart a restructuring plan by the commercial lender.
Icahn said in a letter he will pay those bondholders 60 cents on the dollar for their debt if they agree to reject CIT's debt restructuring plan.
New York-based CIT, one of the nation's largest lenders to small and mid-sized businesses, is trying to get bondholders to swap existing debt for new debt that matures later and stock. CIT is trying to reduce its near-term debt maturities by $5.7 billion.
On Monday, CIT sweetened its exchange offer for a second time in two weeks in an apparent sign debtholders are balking at the program.
Icahn said CIT's restructuring plan is unfair to small bondholders.
CIT is likely to file for bankruptcy protection if it is unable to win acceptance for the restructuring plan, which would reduce its near-term debt maturities by about $5.7 billion. Even if it can complete the restructuring, it has warned it still might have to reorganize under bankruptcy protection.
While CIT is asking bondholders to swap their debt, it is also seeking their approval for a prepackaged bankruptcy plan that might be needed even if the debt exchange is successful.
Icahn's offer would go into effect only if CIT's debt exchange offer, which expires Thursday, fails. Icahn would give bondholders 30 days to accept his offer.
Last week, Icahn offered CIT a $6 billion loan in an effort to get the company to stop the restructuring plan.
If CIT were to collapse, it could hurt an economy already struggling to recover. It is a short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation.
CIT's losses have been mounting as its borrowing costs have risen faster than its income following the credit crisis of a year ago. It received $2.3 billion in federal bailout money last fall and a $3 billion emergency loan in July from some of its largest bondholders.
