By Paul Deckelman
New York, March 23 - CIT Group Inc. priced a $2 billion two-part offering (expected B3/B+) of second-priority senior secured notes on Wednesday, planning on using the proceeds to redeem some of its more than $20 billion of outstanding series A secured notes.
The New York-based commercial lender's quickly shopped deal priced just hours after the company's initial announcement that it would do a benchmark-sized offering of three-year notes. Following a mid-morning investor call, the company restructured its deal, expanding the offering to a two-part transaction with the addition of a seven-year piece.
CIT ended up pricing $1.3 billion of 5¼% secured notes due 2014 and $700 million of 6 5/8% secured notes due 2018. Both tranches priced at par, in line with price talk that circulated following the investor call.
Both tranches of the Rule 144A and Regulation S bonds, issued with contingent registration rights, are non-callable for the life of the respective issue, other than via a make-whole call at 50 basis points over Treasuries. Both carry a change-of-control provision at 101%.
The notes will be obligations of CIT and will be secured by the same collateral that secures CIT's outstanding series A notes. They will be guaranteed by the same CIT subsidiaries that guarantee the outstanding series A paper.
The deal was brought to market via joint bookrunners Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC.
Credit Agricole Securities (USA) Inc., Goldman Sachs & Co., Morgan Stanley & Co. Inc., RBC Capital Markets, LLC and UBS Securities LLC acted as co-managers on the deal.
CIT said that it plans to use the roughly $1.97 billion of net proceeds it expects to realize from the deal after expenses to retire all of the company's outstanding 7% series A second-priority senior secured notes due 2013 and a portion of its 7% series A notes due 2014, along with related premiums, fees and expenses.
CIT issued $23.19 billion of second-priority senior secured notes as part of its exit financing when the company - hard-hit by the financial crisis of 2008 and 2009 - emerged from Chapter 11 in December 2009. It issued $21.04 billion of the series A bonds of varying maturities between 2013 and 2017, each carrying a 7% coupon, and $2.15 billion series B bonds carrying a 10¼% coupon and maturing between 2013 and 2017. The latter bonds have since all been extinguished, and the company in January took out $500 million of the $2.1 billion of its 7% notes due 2013.
Following the repurchases, that left $1.6 billion of the 7% issue outstanding, along with $3.16 billion of the 2014 series A paper and $15.78 billion of series A notes maturing between 2015 and 2017.
On the company's Feb. 15 conference call following the release of its 2010 fourth-quarter and full-year results, its chief financial officer, Scott T. Parker, said that with the more than $20 billion of series A bonds outstanding, "it's not going to be solved by one activity. It's going to be a combination of some payments, it's going to be a combination of what different alternatives are out there for different types of debt, and those are things we'll continue to look at, given what the marketplace is."
| Issuer: | CIT Group Inc.
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| Amount: | $2 billion
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| Securities: | Series C second-priority senior secured notes
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| Joint bookrunners: | Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC
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| Co-managers: | Credit Agricole Securities (USA) Inc., Goldman Sachs & Co., Morgan Stanley & Co. Inc., RBC Capital Markets, LLC, UBS Securities LLC
|
| Call features: | Make-whole call at Treasuries plus 50 bps
|
| Change-of-control put: | 101% plus accrued and unpaid interest, if any
|
| Expected ratings: | Moody's: B3
|
| Standard & Poor's: B+
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| Trade date: | March 23
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| Settlement date: | March 30
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| Distribution: | Rule 144A and Regulation S, with contingent registration rights
|
| Marketing: | Quick to market (same day as announcement)
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|
|
| Three-year notes
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| Amount: | $1.3 billion
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| Maturity: | April 1, 2014
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| Coupon: | 5¼%
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| Price: | Par
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| Yield: | 5¼%
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| Spread: | 412 bps over 1¼% U.S. Treasury due March 15, 2014
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| Price talk: | 5¼% area
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|
|
| Seven-year notes
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| Amount: | $700 million
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| Maturity: | April 1, 2018
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| Coupon: | 6 5/8%
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| Price: | Par
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| Yield: | 6 5/8%
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| Spread: | 389 bps over 2¾% U.S. Treasury due Feb. 28, 2018
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| Price talk: | 6 5/8% area
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