October 30, 2009

The CIT saga continues:

CIT Group Inc., the 101-year-old commercial lender trying to avoid collapse, reached a deal with Goldman Sachs Group Inc. to reduce a $3 billion credit facility to $2.13 billion and keep the line open should CIT file for bankruptcy.

In exchange, Goldman Sachs received $285 million in termination fees, New York-based CIT said today in a filing with the U.S. Securities and Exchange Commission. Under the terms of the two companies’ original agreement, Goldman Sachs would have been due a $1 billion termination payment to close the credit line after a CIT bankruptcy.

CIT is attempting to cut its bills by asking creditors to exchange about $30 billion of debt for new securities. If the plan fails, the company may go bankrupt, which could erase most of the $2.3 billion stake held by U.S. taxpayers. CIT said in a statement today that the deadline for bondholders to vote on the plan passed last night and it is still counting ballots.

CIT has come to an agreement with Icahn, which suggests to me the restructuring has failed:

it has entered into an agreement with Carl Icahn to support its restructuring plan and secured an incremental $1 billion committed line of credit from Icahn Capital LP to provide supplemental liquidity for CIT as it pursues that plan.

This new line of credit may be drawn by the Company on or prior to December 31, 2009, subject to definitive documentation and other customary conditions, and may be drawn as debtor-in-possession financing in the event of bankruptcy. Together with CIT’s $4.5 billion expansion facility, announced on October 28, 2009, and other available sources of liquidity, the line of credit will further enhance CIT’s liquidity during the execution of its restructuring plan and ensure its ability to serve its existing small business and middle market customers.

The preferred share market closed a lousy month on a high note, with PerpetualDiscounts up 13bp and FixedResets up 11bp. Volume was light, which may be related to the banks’ year-ends today; the prop desks being less willing than usual to facilitate trading by taking positions.

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.

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 -0.2234 % 1,474.1
FixedFloater 6.54 % 4.61 % 48,168 18.06 1 2.2769 % 2,381.1
Floater 2.64 % 3.09 % 99,856 19.48 3 -0.2234 % 1,841.5
OpRet 4.88 % -6.10 % 117,472 0.09 15 -0.2045 % 2,289.4
SplitShare 6.39 % 6.47 % 456,408 3.93 2 0.1989 % 2,068.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2045 % 2,093.4
Perpetual-Premium 5.91 % 5.96 % 137,808 13.78 11 -0.0807 % 1,852.9
Perpetual-Discount 5.99 % 6.04 % 205,311 13.85 63 0.1279 % 1,731.6
FixedReset 5.53 % 4.26 % 443,286 3.99 41 0.1094 % 2,106.7
Performance Highlights
Issue Index Change Notes
TD.PR.Q Perpetual-Discount -1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 23.59
Evaluated at bid price : 23.78
Bid-YTW : 5.92 %
BAM.PR.J OpRet -1.39 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 5.66 %
RY.PR.G Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 19.36
Evaluated at bid price : 19.36
Bid-YTW : 5.82 %
TD.PR.O Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 5.77 %
PWF.PR.M FixedReset 1.13 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 4.18 %
BNS.PR.N Perpetual-Discount 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 22.91
Evaluated at bid price : 23.07
Bid-YTW : 5.72 %
CIU.PR.A Perpetual-Discount 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 19.56
Evaluated at bid price : 19.56
Bid-YTW : 5.99 %
PWF.PR.E Perpetual-Discount 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 22.15
Evaluated at bid price : 22.60
Bid-YTW : 6.10 %
BAM.PR.G FixedFloater 2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 25.00
Evaluated at bid price : 16.62
Bid-YTW : 4.61 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.A FixedReset 141,755 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.37
Bid-YTW : 4.39 %
CM.PR.J Perpetual-Discount 104,400 TD crossed 99,900 at 18.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 6.06 %
MFC.PR.B Perpetual-Discount 66,942 RBC crossed 56,700 at 19.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 19.24
Evaluated at bid price : 19.24
Bid-YTW : 6.14 %
TD.PR.K FixedReset 51,550 Desjardins crossed 43,300 at 27.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.16
Bid-YTW : 4.32 %
BMO.PR.N FixedReset 44,500 RBC bought two blocks from TD at 27.95: 12,500 and 10,000 shares.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.91
Bid-YTW : 3.92 %
CM.PR.H Perpetual-Discount 31,507 RBC crossed 10,000 at 20.03 and 10,600 at 20.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-10-30
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.04 %
There were 23 other index-included issues trading in excess of 10,000 shares.

2 Responses to “October 30, 2009”

  1. […] spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) closed the month at 250bp compared to the September 30 value of […]

  2. […] pre-tax interest-equivalent spread of PerpetualDiscounts over Long Corporates increased to 250bp on October 30 from 215bp on September 30, indicating at the very least that the broader bond market does not […]

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