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US bank secures $3bn rescue loan US bank in warning on bankruptcy
(about 13 hours later)
Troubled US bank CIT has secured a $3bn (£1.8bn) rescue loan from bondholders, removing the immediate threat of going into bankruptcy protection. US bank CIT has said it may still have to file for bankruptcy protection if not enough of its bondholders agree to a refinancing plan.
The company said it now planned a comprehensive restructuring of its debts, but gave few details. Its comments came despite the bank having secured a $3bn (£1.8bn) rescue loan from bondholders on Monday.
Despite the cash boost, some analysts said it may only delay the need for CIT to make a bankruptcy filing. CIT said it still had to meet about $7bn in debts which fall due in the next year, including $1bn in August.
CIT, which specialises in loans to smaller firms, has been hit by the credit squeeze and recession. CIT, which specialises in loans to smaller firms, also predicted a second-quarter loss of more than $1.5bn.
The US government has ruled out bailing out the bank.The US government has ruled out bailing out the bank.
CIT is seeking to split its profitable operations from the loss-making parts of the business. CIT - which has debts of about $40bn - is seeking to split its profitable operations from the loss-making parts of the business.
Analyst Michael Goldsmith, a managing director at financial advisory firm BBK, said he was concerned at the high interest rates CIT will have to pay for the $3bn loan. It is estimated that CIT will have to pay an annual rate of 10.5%. CIT's shares jumped 79% on Monday on reports of the $3bn loan deal, but in early trading on Tuesday, the shares were down 25 cents, or 20%, at $1.00.
CIT's shares rose 79% on Monday before the loan announcement, but the share price remains only 10% of its peak value in the past 12 months.
The company has debts of about $40bn.