Billionaire investor Carl Icahn offered a six billion dollar loan Monday to ailing lending giant CIT Group, calling it an alternative to a plan he said favors large bondholders.
Icahn made the offer in a letter to the board of the troubled business lender, which has been on the brink of bankruptcy since the US government declined to provide a bailout earlier this year.
Icahn, who has made a name for himself as a corporate raider, said the CIT board was "shamelessly offering certain large unsecured bondholders the opportunity to purchase six billion dollars in secured loans in the company at well below fair market value."
"The largest holders will be given that right at the expense of thousands of smaller bondholders who will not be given the same opportunity," said Icahn, who said he was the largest CIT creditor.
"We cannot sit idly by and watch you continue to destroy the value of the bondholders' assets, in this case by outrageously overpaying fees in order to induce your largest bondholders to vote for a plan which benefits and leaves in place an entrenched board of directors in charge of our company following its restructuring or bankruptcy."
Icahn said his plan would save as much as 150 million dollars in fees and "would not force bondholders to vote for the current plan" which Icahn claims would entrench current board members responsible for the company's financial condition.
CIT acknowledged the offer and said it was the first communication with Icahn on the offer.
"The company intends to ask Mr. Icahn for more information regarding his proposal," CIT said in a statement.
The statement said CIT "has developed a comprehensive restructuring plan designed to enhance its capital levels, bolster liquidity and return the company to profitability."
"Over the past several months, CIT has actively solicited competitive financing proposals and remains open to securing financing on the most beneficial terms," it added.
CIT warned earlier this month it might file for bankruptcy if it failed to launch a comprehensive debt-exchange plan to beef up capital levels.
The company, which provides financing to small businesses and middle market companies, had launched a restructuring of its capital structure approved by its board and bondholders.
CIT, which ran into financial problems after a home mortgage meltdown plunged the country into its worst crisis in decades, has about 40 billion dollars of long-term debt, reports have said.
CIT was rescued from almost certain bankruptcy by some of its largest bondholders in July in a three-billion-dollar emergency agreement after the US government rejected the company's plea for a fresh bailout.
The government had already provided 2.33 billion dollars to CIT.
The decision not to bail out CIT came after the US government injected tens of billions of dollars into the banking system and outlined a policy of helping large firms as the financial system came under pressure following the crisis.
Operating in more than 50 countries, CIT is a bank holding company with more than 60 billion dollars in finance and leasing assets that provides financial products and advisory services to small and middle market businesses.
Copyright 2009  AFP Global Edition
