CIT Australia Bondholders Agree to Waive Rights, Letter Shows

Written by Sarah McDonald

Posted by Minjune Kim

Nov. 3 (Bloomberg) -- Bondholders of CIT Group Inc.’s Australian unit agreed to allow the lender to keep operating as normal after the U.S. parent filed for bankruptcy, according to a company letter to clients seen by Bloomberg News.

CIT Australia negotiated “certain concessions” for investors in its medium-term notes in return for them “forbearing from exercising rights associated with the bankruptcy,” it said in a letter dated yesterday and signed by Managing Director Keith Rodwell.

The letter didn’t give details on the concessions and Rodwell declined to comment when contacted at his office.

CIT, based in New York, listed $71 billion in assets and $64.9 billion in liabilities in a Chapter 11 petition to the U.S. Bankruptcy Court in Manhattan on Nov. 1. The lender, which funds about 1 million businesses such as Dunkin’ Brands Inc. and Eddie Bauer Holdings Inc., said it plans to exit court protection quickly because of support from bondholders, who voted for a “prepackaged” plan.

CIT Group (Australia) Ltd. sold A$300 million ($271 million) of fixed- and floating-rate notes in 2006, according to data compiled by Bloomberg. The bonds were guaranteed by CIT Group, National Australia Bank Ltd. analysts said in a research note yesterday.

The guarantor’s bankruptcy is likely to trigger an event of default, which gives bondholders the right to demand early repayment. The bonds mature in March 2011, Bloomberg data show.

None of CIT’s operating subsidiaries is included in the U.S. bankruptcy filing, according to a group statement.

“CIT Australia is well capitalized, profitable and cash- flow positive,” and the parent group’s bankruptcy filing will have “limited effect” on its daily business, the letter said.

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