CIT Group, the US commercial lender that is struggling to avoid bankruptcy, on Wednesday said it had received a $4.5bn loan from a “diverse group” of lenders and had turned down a competing offer from Carl Icahn, the activist investor.
The lenders included some of the bondholders that this year provided CIT with $3bn of rescue funding, the company said.
The loan will be used to refinance existing loans that may come due as CIT tries to win support for a restructuring plan.
CIT has until midnight to obtain votes from its bondholders for a debt exchange that will reduce its debt burden by almost $6bn, or obtain approval for a prepackaged bankruptcy filing.
If the company fails to win sufficient votes and bondholders vote against the proposed prepackaged bankruptcy, CIT will be forced to file for Chapter 11 bankruptcy protection without a pre-agreed plan.
The restructuring plan has sparked a war of words between CIT and Mr Icahn, who claims to be the company’s largest bondholder and has argued that the prepackaged bankruptcy would result in “destruction of value” at CIT.
He has also objected to the current board of directors retaining control of the company.
The dispute has prompted several attempts by Mr Icahn to offer different financing alternatives and to rally other bondholders to vote against the plan.
The company said that it had turned down Mr Icahn’s latest offer to fund the $4.5bn loan in part because it arrived so close to CIT’s deadline to arrange new funding.
Mr Icahn presented the offer late on Tuesday, giving CIT less than an hour to review and accept his terms, the company said.
CIT added that they had received no proof of Mr Icahn’s ability to fund the commitment.
Mr Icahn on Tuesday offered to limit losses for bondholders who joined him in an 11th-hour attempt to block CIT’s plan. In exchange for every “no” vote, he offered to buy bonds for 60 cents on the dollar.
He also said that brokers and financial advisers would receive a $5 commission for each $1,000 of bonds tendered under his offer.
The bonds are currently trading at about 65 cents on the dollar.
The company has said that a bankruptcy filing without a pre-agreed plan could result in bondholders receiving as little as 6 cents on the dollar.