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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (211543)	7/22/2009 4:44:32 PM
From: RockyBalboa	Respond to of 306849

>>>>>>>>> SAN FRANCISCO (MarketWatch) -- Bondholders should reject CIT Group Inc.'s offer to buy $1 billion of debt due next month for 82.5 cents on the dollar because it benefits investors owning the short-term debt at the expense of long-term debt holders, CreditSights, an independent fixed-income research firm, said Wednesday. CIT got a $3 billion loan from a group of its major bondholders this week, helping it to avoid bankruptcy for now. See full story. But the $3 billion can't be used to pay principal and interest on $1 billion of debt that's maturing on Aug. 17. Instead, CIT unveiled a tender offer in which it will pay investors 82.5 cents on the dollar for that debt. "CIT's offer lacks a carrot to entice bondholders to accept the tender, but the restrictions on the use of the loan facility to pay the principal and interest of the August maturity may act as a stick that compels bondholders to accept," wrote CreditSights analysts Adam Steer, David Hendler, Pri de Silva and Jesse Rosenthal. However, they advised bondholders to reject CIT's tender offer. The offer needs investors holding at least 90% of the debt to sign up. If that doesn't happen and it can't get other financing, CIT warned that it may have to file for bankruptcy protection from creditors. <<<<<<<<<<< This also explains the huge gradient in the existing bonds with the longer maturities thrown out at prices downto 15% when the bonds subject to tender have been solidly bid long before the bond offering was announced. This was a clear case of insider trading (small problem though: insider trading is not applicable to straight bonds). You don´t have that in the garden variety distressed story. See first sightings after the trade halt: Message 25787404 Some of the bonds are stubbornly bidding 45%, 48%.