In a rare instance of good news on the banking front, CIT Group Inc. said it would prepay its $2.1 billion drawn bank credit facility three months in advance of the October 2008 due date.
The commercial finance company said that it notified lenders under the revolving credit facility that payment would be made on July 30, representing the initial repayment of the funds borrowed under its bank credit facilities in March 2008, CIT said. It added that the remaining $5.2 billion of borrowings have maturities in April 2009, April 2010, and December 2011.
“Our decision to begin paying down our revolving bank lines in advance of their maturities reflects the significant progress we have made in securing more than $10 billion in liquidity over the past three months, ” said CIT Chairman and CEO Jeffrey M. Peek. “This action is an important step for CIT in achieving a more balanced funding profile. “
CIT noted that on June 30 it had $7.4 billion of liquid and available cash, and since has executed strengthened the balance sheet with initiatives focused on extending liquidity and positioning the company for long-term success and profitability. Those moves include closing on sale of its home lending portfolio for $1.8 billion in cash and assumption of $4.4 billion of secured debt, and using a secured aircraft financing facility that it expects to use to finance about $1.5 billion of Airbus plane deliveries scheduled through 2009.
In addition, CIT will begin using the $3 billion long-term financing facility it obtained from Goldman Sachs last month, when CIT said that arrangement would provide it with funding flexibility to finance both existing assets and new originations.
Earlier this month CIT reported a steep drop in operating income for the second quarter, but said it had done significant repair to its balance sheet and is now positioned to meet liquidity needs through the end of 2009. In late May, Moody’s Investors Service downgraded CIT senior unsecured debt rating from A3 to Baa1 and left the financing company’s long-term ratings on review for possible downgrade.
In an unusual move at that time, CIT challenged Moody’s assessment, saying it disagreed “particularly in light of the significant progress we have made to strengthen our balance sheet, improve liquidity and position CIT for long-term success and profitability.” It added, “We have successfully executed on our current strategic funding initiatives, which have included capital raising, asset sales, financings and growth at CIT Bank.”