JUNE 25, 2010.

CIT Prepays $1.25 Billion In Debt in Bid to Cut Costs

By MATT JARZEMSKY

CIT Group Inc. prepaid $1.25 billion of debt after securitizing receivables and selling assets, relieving part of the debt burden that has weighed on the company since its exit from bankruptcy.

The prepayment made Wednesday and disclosed Thursday in a filing with the Securities and Exchange Commission consisted of a $950 million mandatory portion, required under its credit agreement after the securitization of receivables and the sale of assets, and $300 million paid voluntarily by the lender to small businesses.

The company had said in April that it intended to make $1.5 billion in prepayments after seeing liquidity and cash flow improve, and that total cash available to repay debt increased to $5.5 billion as of the end of the first quarter. The company has said the loan payments are eating into its profitability.

The company emerged from bankruptcy protection in December and was profitable in the first quarter, beating analysts' expectations for a loss. But it exited bankruptcy protection with a $7.5 billion credit facility, the repayment of which is one of its main challenges. CIT posted a first-quarter profit of $97.3 million.

The 102-year-old institution, a crucial conduit of funds to small and midsized lenders, fell victim to the credit crisis and eventually cut a deal with lenders that pushed it into bankruptcy protection. It traditionally has relied on bonds and commercial paper to raise funds, which it then lent out at a higher interest rate. That model proved weak amid the credit crisis when CIT had difficulty raising capital cheaply.

In 4 p.m. New York Stock Exchange composite trading, CIT's shares fell 88 cents, or 2.4%, to $35.72.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com

http://online.wsj.com/article/SB1000142 ... llbusiness