July 20, 2009

CIT has reportedly received a $3-billion financing offer from extant bondholders:

CIT Group Inc. reached a deal with bondholders for $3 billion in financing to avoid bankruptcy and restructure out of court, the Wall Street Journal reported.

Thomas Lauria, a lawyer at White & Case LLP, said in an e- mail last week that a group of CIT creditors he represents offered to provide $3 billion in new loans to bridge CIT to an out-of-court restructuring or an orderly bankruptcy. He said the group was waiting for a response from CIT and didn’t name its members.

CIT’s $300 million of 6.875 percent notes due in November rose 7.5 cents on the dollar to 64 cents on July 17, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

There are reports with more details, none of which are yet confirmed:

— CIT Group Inc., the 101-year-old commercial finance company seeking to ward off bankruptcy, agreed to a $3 billion loan for 2.5 years from a group of its bondholders, according to people familiar with the situation.

CIT bondholders have committed $2 billion of the loan as of today, and plan to raise the remaining $1 billion from existing bondholders within the next 10 days, said one of the people, who declined to be identified because the negotiations are private. The board agreed to the financing yesterday, and CIT plans to announce the agreement as soon as today, another person said.

Econbrowser‘s James Hamilton contributed to a piece in the NYT:

So there is a process of fumbling around on a case-by-case basis as we try to figure out where to draw the line — prop up A.I.G., let Lehman and CIT go. Uncertainty about just who is going to be protected and who will be allowed to fail is yet another factor exacerbating the current instabilities.

Since there’s no easy way out once we face that decision, the obvious answer is to use regulation to prevent any private institution from putting us in a position where policymakers feel their only option is a public bailout. “Too big to fail” is, in my opinion, “too big.”

And Accrued Interest urges letting it go:

So put this all together, and you have a basic business model: asset-based lender without access to bank funding, that just flat out doesn’t fit in today’s world. CIT may as well be making type writer ribbons. I’m sorry, it just has to go.

This is the moment were we take the training wheels off the economy. We had to do it at some point. We had to eventually send a message to the world of finance that not everything was going to be bailed out.

How great would it be for CIT to work something out with bond holders? I mean, an actual “normal” deal to avoid bankruptcy? I mean, it would almost be like capitalism is back!

The somewhat geeky topic of separation of Central Banking and Bank Supervision has become a political issue in the UK:

Conservative leader David Cameron proposed the most sweeping changes to Britain’s financial regulatory system in a decade, adopting U.S.-style plans to strengthen the central bank and create a consumer watchdog.

The opposition party will scrap the Financial Services Authority and hand powers over lenders deemed too big to fail to the Bank of England if it wins the next election due by June 2010. The plan mirrors proposals by U.S. President Barack Obama to beef up the Federal Reserve.

Standard political reaction. Find out who is least blameworthy in today’s crisis, put them on a pedestal, then act surprised when the next crisis (after the next election, they hope!) shows that nobody has perfect foresight.

Accrued Interest has some interesting things to say about bond indentures for US Municipals.

PerpetualDiscounts shot up today on good volume with a great deal of price volatility.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.6941 % 1,153.5
FixedFloater 7.20 % 5.41 % 35,769 16.75 1 0.6667 % 2,132.4
Floater 3.30 % 3.91 % 79,946 17.62 3 -0.6941 % 1,441.1
OpRet 4.99 % -1.85 % 137,231 0.09 15 -0.3913 % 2,212.4
SplitShare 6.05 % 4.05 % 94,206 4.14 4 0.2047 % 1,937.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3913 % 2,023.0
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.4624 % 1,786.8
Perpetual-Discount 6.20 % 6.24 % 156,792 13.58 71 0.4624 % 1,645.6
FixedReset 5.52 % 4.23 % 573,427 4.22 40 0.0715 % 2,080.6
Performance Highlights
Issue Index Change Notes
BAM.PR.O OpRet -3.96 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 23.05
Bid-YTW : 7.45 %
ELF.PR.F Perpetual-Discount -3.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 18.29
Evaluated at bid price : 18.29
Bid-YTW : 7.31 %
BAM.PR.J OpRet -2.61 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 7.38 %
W.PR.J Perpetual-Discount -2.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 21.76
Evaluated at bid price : 22.01
Bid-YTW : 6.40 %
MFC.PR.C Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 17.34
Evaluated at bid price : 17.34
Bid-YTW : 6.58 %
TRI.PR.B Floater -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 2.55 %
MFC.PR.E FixedReset -1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.67
Bid-YTW : 4.36 %
POW.PR.D Perpetual-Discount -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 19.28
Evaluated at bid price : 19.28
Bid-YTW : 6.54 %
W.PR.H Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 21.26
Evaluated at bid price : 21.26
Bid-YTW : 6.53 %
PWF.PR.J OpRet -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-30
Maturity Price : 25.50
Evaluated at bid price : 25.71
Bid-YTW : 3.48 %
PWF.PR.H Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 22.05
Evaluated at bid price : 22.05
Bid-YTW : 6.56 %
CM.PR.H Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 18.99
Evaluated at bid price : 18.99
Bid-YTW : 6.35 %
RY.PR.C Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 19.76
Evaluated at bid price : 19.76
Bid-YTW : 5.93 %
RY.PR.X FixedReset 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.18
Bid-YTW : 3.98 %
CM.PR.G Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 6.31 %
PWF.PR.E Perpetual-Discount 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 21.74
Evaluated at bid price : 22.05
Bid-YTW : 6.25 %
SLF.PR.C Perpetual-Discount 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 17.46
Evaluated at bid price : 17.46
Bid-YTW : 6.45 %
SLF.PR.D Perpetual-Discount 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 6.45 %
BAM.PR.P FixedReset 1.17 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-30
Maturity Price : 25.00
Evaluated at bid price : 26.91
Bid-YTW : 5.55 %
CIU.PR.B FixedReset 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-01
Maturity Price : 25.00
Evaluated at bid price : 28.16
Bid-YTW : 4.12 %
CM.PR.I Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 18.69
Evaluated at bid price : 18.69
Bid-YTW : 6.32 %
NA.PR.K Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 23.26
Evaluated at bid price : 23.54
Bid-YTW : 6.21 %
SLF.PR.A Perpetual-Discount 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 6.59 %
BNS.PR.O Perpetual-Discount 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 23.61
Evaluated at bid price : 23.80
Bid-YTW : 5.90 %
NA.PR.L Perpetual-Discount 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 6.00 %
RY.PR.H Perpetual-Discount 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 24.25
Evaluated at bid price : 24.46
Bid-YTW : 5.87 %
BNS.PR.R FixedReset 1.42 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 4.23 %
BNS.PR.L Perpetual-Discount 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.91 %
PWF.PR.G Perpetual-Discount 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 22.72
Evaluated at bid price : 23.01
Bid-YTW : 6.43 %
CM.PR.P Perpetual-Discount 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 21.85
Evaluated at bid price : 22.17
Bid-YTW : 6.22 %
BAM.PR.M Perpetual-Discount 1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 7.50 %
SLF.PR.E Perpetual-Discount 2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 17.51
Evaluated at bid price : 17.51
Bid-YTW : 6.50 %
GWO.PR.F Perpetual-Discount 2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 23.97
Evaluated at bid price : 24.26
Bid-YTW : 6.14 %
BMO.PR.J Perpetual-Discount 2.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 5.81 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.A Perpetual-Discount 89,455 TD crossed two blocks, 50,000 and 20,000 shares, both at 18.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 6.59 %
TD.PR.O Perpetual-Discount 70,529 RBC crossed 20,000 at 20.46, then sold 19,500 to Nesbitt at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 5.94 %
BNA.PR.D SplitShare 61,527 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-07-09
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 7.27 %
MFC.PR.A OpRet 56,460 RBC crossed 47,800 at 25.35.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 4.05 %
MFC.PR.D FixedReset 45,462 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 28.06
Bid-YTW : 4.05 %
RY.PR.B Perpetual-Discount 39,896 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-07-20
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 6.07 %
There were 44 other index-included issues trading in excess of 10,000 shares.

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