(Bloomberg) -- CIT Group Inc., the commercial lender trying to escape a cash squeeze, rose as much as 14 percent in New York trading after Goldman Sachs Group Inc. agreed to provide $3 billion in financing.
The accord lasts for about 15 years and can be used to finance both existing assets and new loans, New York-based CIT said today in a statement.
CIT has been battered by losses on subprime mortgages and student lending. Chief Executive Officer Jeffrey Peek has already sold stock and assets, cut the dividend and drawn down $7.3 billion of emergency credit lines to quell concern about the firm's fiscal health. CIT lost $249.7 million before preferred dividends in the first quarter.
``This will definitely help as the other unsecured debt comes due,'' said David Chiaverini, an analyst with BMO Capital Markets in New York. ``I don't think they are completely in the free and clear yet.''
The lender advanced $1.19 to $10.38 a share at 9:30 a.m. in New York Stock Exchange composite trading and sold for as much as $10.48. The company's shares had dropped 62 percent this year before today. Credit-default swaps tied to CIT's bonds fell, signaling an improvement in investor confidence in the company's ability to repay its debt.
The contracts fell 27 basis points to 488 basis points, according to CMA Datavision. The contracts are used to speculate on a company's creditworthiness or to hedge against losses.
``We view this transaction as another important milestone in achieving our desired financing profile,'' Peek said in the statement.
UBS AG credit analyst David Havens called the Goldman accord ``another salutary step'' in a note to investors.
``We continue to believe CIT is a very well-managed firm, but its core independent wholesale funded business model seems to be going the way of the Mohicans, the buggy whip, the eight- track player,'' he wrote.
Among the assets up for sale is CIT's railcar-leasing business. Chief Financial Officer Joseph Leone said last week that multiple bidders, including at least one from outside the U.S., have made offers.
CIT stopped originating home mortgages and student loans to focus on providing financing and advisory services to mid-sized companies.
The accord lasts for about 15 years and can be used to finance both existing assets and new loans, New York-based CIT said today in a statement.
CIT has been battered by losses on subprime mortgages and student lending. Chief Executive Officer Jeffrey Peek has already sold stock and assets, cut the dividend and drawn down $7.3 billion of emergency credit lines to quell concern about the firm's fiscal health. CIT lost $249.7 million before preferred dividends in the first quarter.
``This will definitely help as the other unsecured debt comes due,'' said David Chiaverini, an analyst with BMO Capital Markets in New York. ``I don't think they are completely in the free and clear yet.''
The lender advanced $1.19 to $10.38 a share at 9:30 a.m. in New York Stock Exchange composite trading and sold for as much as $10.48. The company's shares had dropped 62 percent this year before today. Credit-default swaps tied to CIT's bonds fell, signaling an improvement in investor confidence in the company's ability to repay its debt.
The contracts fell 27 basis points to 488 basis points, according to CMA Datavision. The contracts are used to speculate on a company's creditworthiness or to hedge against losses.
``We view this transaction as another important milestone in achieving our desired financing profile,'' Peek said in the statement.
UBS AG credit analyst David Havens called the Goldman accord ``another salutary step'' in a note to investors.
``We continue to believe CIT is a very well-managed firm, but its core independent wholesale funded business model seems to be going the way of the Mohicans, the buggy whip, the eight- track player,'' he wrote.
Among the assets up for sale is CIT's railcar-leasing business. Chief Financial Officer Joseph Leone said last week that multiple bidders, including at least one from outside the U.S., have made offers.
CIT stopped originating home mortgages and student loans to focus on providing financing and advisory services to mid-sized companies.
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