CIT amended terms on its exchange offer:
- Extension of the expiration date of the offers and the solicitation of acceptances of the Plan of Reorganization only with respect to offers made by CIT Group Funding Company of Delaware LLC (“Delaware Funding”) from October 29, 2009 to November 5, 2009. The Early Tender Date for these notes is October 29, 2009,
- Increased the interest rate payable on the Series B Notes from 9.0% per annum to 10.25% per annum.
… which sounds to me like the deal’s in trouble. They’ve also responded to Carl Icahn’s overtures (reported on PrefBlog on October 23) in a surprisingly mild-mannered way … but to no avail. Icahn’s stepping up the pressure:
Carl Icahn, who says he’s the largest bondholder of CIT Group Inc. with $2 billion of debt, stepped up his attacks on the lender’s restructuring plan as a deadline approaches tomorrow to avert collapse.
Icahn gave CIT an hour to respond late yesterday afternoon to his offer to provide $4.5 billion in financing, and threatened to sue the New York-based company if it chose a competing package from other bondholders. CIT said its plan to either exchange $30 billion of debt for new bonds and equity or file a pre-packaged bankruptcy is worth more to creditors.
…
Icahn, 73, who built his reputation in the 1980s as a corporate raider, said yesterday the investments are worth more in a traditional bankruptcy than in a so-called pre-packaged workout. He is proposing to buy “smaller” holders’ bonds for 60 cents on the dollar in a tender offer lasting 30 days if they reject CIT’s plans, “assuring them a floor price in the event the notes trade lower,” he said yesterday in a statement.
Egan-Jones says the pre-pack should be voted down:
CIT Group Inc. bondholders should reject a proposed $30 billion debt swap and pre-packaged bankruptcy plan designed to avert the 101-year-old commercial lender’s collapse, according to Egan-Jones Ratings Co.
CIT’s unsecured debt is worth about 90 cents on the dollar and senior creditors can expect close to full recovery, Egan- Jones President Sean Egan and analysts Kent Hughes and Gale Gillespie wrote in a report dated today.
And today, the secured facility was increased:
it has expanded its current $3 billion senior secured credit facility by an additional $4.5 billion. The new $4.5 billion tranche, which is being provided by a diverse group of lenders, including many of the Company’s bondholders, will be secured by substantially the same assets as the existing $3 billion tranche and any additional collateral that becomes available as a result of the Company’s refinancing of certain existing secured credit facilities.
…
The new $4.5 billion tranche matures in January 2012, and includes an option for the Company to extend all or a portion of the new tranche for an additional year. It is expected to close today and will be used to refinance a portion of the Company’s existing secured indebtedness, which may come due as a result of the restructuring, and for general corporate purposes.The Company also addressed a commitment letter received yesterday from Carl Icahn to provide CIT a new $4.5 billion term loan. Although Mr. Icahn and his advisors had been in discussions with the Company for several days and were fully aware of CIT’s deadline, they provided the Company less than one hour to review and accept his commitment letter. Additionally, despite several requests from the Company for information and multiple deadline extensions, the Company has yet to receive a signed credit agreement and evidence of Mr. Icahn’s ability to fund the commitment.
As a result of the lack of evidence that Mr. Icahn has arranged sufficient funding at this time, CIT’s Board of Directors determined that the best interests of the Company and its stakeholders would be served by proceeding with the credit facility provided by a diverse group of lenders.
Norway has increased its policy rate:
Norges Bank raised its key interest rate a quarter point from a record low and signaled steeper increases than it previously forecast over the next three years as inflation accelerates and unemployment remains low.
The Oslo-based bank raised the overnight deposit rate to 1.5 percent, becoming the first European central bank to reverse its easing cycle since the credit crisis started to abate.
…
The bank expects underlying inflation, which adjusts for energy and taxes, to average 2.75 percent this year and 1.75 percent in 2010. The mainland economy will shrink 1.25 percent this year and grow 2.75 percent in 2010, it estimates.The key rate will average 1.75 percent this year and 2.25 percent in 2010, rising to an average 4.25 percent by 2012, the bank said.
The AIG bail-out is providing providing fodder for conspiracy theorists:
The Federal Reserve Bank of New York said Tuesday that it had no choice but to instruct American International Group last November to reimburse the full amount of what it owed to big banks on derivatives contracts, a move that ended months of effort by the insurance giant to negotiate lower payments.
Fed officials offered the explanation in a rare response to a media report after Bloomberg News said that the New York Fed, led at the time by then-President Timothy F. Geithner, directed AIG to make the payments after it received a massive government bailout. The officials said AIG lost its leverage in demanding a better deal once the company had been saved from bankruptcy.
Lawmakers and financial analysts critical of the payouts say it amounted to a back-door bailout for big banks.
…
The precise cost to taxpayers of these decisions is difficult to determine. Bloomberg, quoting an industry source, reported Tuesday that AIG was aiming to pay just 40 percent of the $32.5 billion it owed to the banks. Using those figures, the report concluded that the government needlessly overpaid $13 billion.
…
New York Fed officials explained that the main reason creditors were willing for a time to accept less than full reimbursement was their fear of an AIG bankruptcy. The government’s rescue of the company removed that threat and left the company with virtually no way to wrestle concessions from the banks.
Just because conspiracy theorists are nuts doesn’t mean they’re always wrong!
The SEC released today Testimony Concerning Dark Pools, Flash Orders, High Frequency Trading, and Other Market Structure Issues. Interesting, although ultimately unsatisfying: I remain perplexed regarding the badness of flash orders and high-frequency trading:
while flash orders may potentially be providing benefits to certain traders, it may no longer serve the interests of long-term investors or the markets as a whole. The Commission has stated, both in adopting Regulation NMS and in proposing to ban flash orders, that the interests of long-term investors should be upheld as against those of professional short-term traders, when those interests are in conflict. The comment period on the proposal to ban flash orders remains open until November 23, and the staff and the Commission look forward to carefully analyzing the comments received.
It was another putrid period of poorly performing preferreds today, with PerpetualDiscounts down 20bp and FixedResets losing 11bp. Volume was off a bit (prefhound was putting his orders through Pure today), but still healthy.
PerpetualDiscounts now yield 6.05%, equivalent to 8.47% interest at the standard equivalency factor of 1.4x. Long Corporates now yield a hair under 6.0%, so let’s call the Pre-Tax Interest-Equivalent Spread (also called the Seniority Spread, according to me) 250bp, with all levels indistinguishable from those reported on October 21.
| 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 | 0.5390 % | 1,477.4 |
| FixedFloater | 6.59 % | 4.65 % | 47,374 | 18.00 | 1 | -2.4260 % | 2,362.4 |
| Floater | 2.64 % | 3.08 % | 106,963 | 19.51 | 3 | 0.5390 % | 1,845.7 |
| OpRet | 4.87 % | -6.67 % | 114,728 | 0.09 | 15 | -0.0051 % | 2,293.5 |
| SplitShare | 6.43 % | 6.51 % | 477,131 | 3.93 | 2 | -0.3535 % | 2,056.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0051 % | 2,097.1 |
| Perpetual-Premium | 5.90 % | 5.93 % | 141,654 | 13.82 | 11 | -0.0183 % | 1,856.7 |
| Perpetual-Discount | 6.00 % | 6.05 % | 214,992 | 13.82 | 63 | -0.2038 % | 1,729.2 |
| FixedReset | 5.53 % | 4.30 % | 447,423 | 4.00 | 41 | -0.1075 % | 2,103.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.G | FixedFloater | -2.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 25.00 Evaluated at bid price : 16.49 Bid-YTW : 4.65 % |
| BNS.PR.P | FixedReset | -2.40 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 4.77 % |
| MFC.PR.A | OpRet | -1.71 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 3.58 % |
| GWO.PR.L | Perpetual-Discount | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 22.97 Evaluated at bid price : 23.11 Bid-YTW : 6.18 % |
| POW.PR.B | Perpetual-Discount | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 21.56 Evaluated at bid price : 21.56 Bid-YTW : 6.27 % |
| TD.PR.A | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 4.51 % |
| GWO.PR.F | Perpetual-Discount | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 23.99 Evaluated at bid price : 24.29 Bid-YTW : 6.14 % |
| PWF.PR.G | Perpetual-Premium | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 23.76 Evaluated at bid price : 24.06 Bid-YTW : 6.16 % |
| TD.PR.Q | Perpetual-Discount | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 23.96 Evaluated at bid price : 24.17 Bid-YTW : 5.82 % |
| RY.PR.C | Perpetual-Discount | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 5.83 % |
| BAM.PR.P | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 26.85 Bid-YTW : 5.47 % |
| NA.PR.N | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-14 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.95 % |
| ENB.PR.A | Perpetual-Premium | 1.20 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2009-11-27 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 0.84 % |
| BAM.PR.K | Floater | 1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 3.08 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CIU.PR.B | FixedReset | 60,475 | Desjardins crossed 50,000 at 28.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 28.00 Bid-YTW : 4.17 % |
| SLF.PR.D | Perpetual-Discount | 47,778 | RBC crossed 40,000 at 18.49. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 6.13 % |
| TRP.PR.A | FixedReset | 40,025 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 4.46 % |
| RY.PR.I | FixedReset | 34,255 | RBC bought 10,000 from anonymous at 25.69. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 4.34 % |
| SLF.PR.B | Perpetual-Discount | 27,339 | RBC crossed 22,900 at 19.88. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.14 % |
| W.PR.J | Perpetual-Discount | 25,800 | RBC crossed 23,600 at 23.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-28 Maturity Price : 23.12 Evaluated at bid price : 23.38 Bid-YTW : 6.03 % |
| There were 31 other index-included issues trading in excess of 10,000 shares. | |||
[…] PerpetualDiscounts closed yielding 6.04%, equivalent to 8.46% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield a hair under 6.0% – having returned +44bp for the month – and thus the pre-tax interest-equivalent spread is now in the 245-250bp range, indistinguishable from the 250bp reported on October 28. […]
[…] PerpetualDiscount winning streak came to an end today, albeit just barely. Its last down day was October 28, as it then rose for nineteen consecutive days, gaining 2.99% as yields fell from 6.05% to 5.88% […]