US CIT Group Inc's board signed off on a deal late Sunday for $3 billion in rescue financing from a group of bondholders, in a plan the lender hopes will stave off bankruptcy, a source close to the situation said.
The company, which lends to nearly one million small and mid-sized businesses, is expected to announce the deal before markets open Monday, according to the source, who did not want to be identified because the talks are private.The bondholder group, which includes Pacific Investment Management Company (Pimco) and some other top CIT holders, is expected to provide the financing with a 2 1/2-year term, two sources said. The deal reached after negotiations through the weekend gives the lender room to resolve its funding problems amid the financial crisis. Without a deal it faced the prospect of bankruptcy as soon as Monday - an event that could have worsened the effects of the downturn for some of its clients. The $3 billion financing plan will be backed by CIT's remaining unsecuritized assets, which likely exceed $10 billion, the second source familiar with the matter said. The second source also did not want to be identified because the talks are private. "The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion," that source said. Curt Ritter, the company's spokesman, declined to comment when the initial details of the deal were reported.