US lender CIT Group is reported to have reached a tentative deal with a group of bondholders for $3 billion in rescue financing, which the lender hopes will help it avoid bankruptcy.
Sources quoted by Reuters said the bondholder group, which includes Pacific Investment Management Company (Pimco) and some other top CIT holders, is expected to provide the financing with a two-and-a-half year term.
CIT's board was to meet to discuss the terms of the deal, and the lender could announce the deal later today. The deal is reported to be part of a larger restructuring plan.
CIT lends to nearly one million small and mid-sized businesses. Its problems surfaced two years ago in the wake of chief executive Jeffrey Peek's decision earlier in the decade to expand into sub-prime mortgages and student loans, both potentially highly profitable but fraught with added risk.
Peek, who was initially surprised when the lender did not get US government help, led the company's efforts to get the funds from private sources, a source said.
CIT gained the status of bank holding company in December so it could draw $2.33 billion of taxpayer money from the Treasury's Troubled Asset Relief Program. But last-ditch rescue talks with the US government failed last week as the Obama administration declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.
CIT is said to have about $40 billion of long-term debt. About $1.1 billion of debt will come due in August, followed by about $2.5 billion by the end of the year.