CIT liquidity:
By Karen Brettell
NEW YORK, Aug 22 (Reuters) - CIT Group Inc.'s (CIT.N: Quote, Profile, Research) credit spreads may have value as the "A"-rated company trades at similar levels to junk rated companies.
In a market that remains nervous over corporate access to short term funding and averse to any exposure to residential mortgages, however, trading of its debt is likely to remain erratic.
CIT's debt has been marred by concerns about whether the company will succeed in rolling its commercial paper, and that it may be forced to sell mortgage assets at distressed prices as part of its plans to exit the business, if it cannot obtain liquidity elsewhere.
But "given that five-year senior CDS spreads are already trading at high yield-type levels, we continue to see value in the credit at current spreads," CreditSights analysts including Richard Hofmann said in a report on Wednesday.
CIT said in July it was exiting the mortgage business after selling its $2.6 billion portfolio and that it took a $495.3 million after-tax write-down related to the assets it plans to sell.
At a meeting with sell side analysts on Tuesday night, CIT assured attendees liquidity was not a problem and that it was aiming to time asset sales with a view of obtaining favorable pricing.
"The company stressed that it is active and maintains access in the short-term funding markets, albeit at higher costs," Hofmann wrote.
CIT indicated that the cost of rolling its commercial paper has jumped to a range of around 25 to 50 basis points over the London interbank offered rate, compared from about 5 basis points below LIBOR before recent market disruptions, he said.
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