On July 20, 2009, CIT Group, Inc., which primarily provides financing to small businesses and middle-market companies, announced that it has entered into a $3 billion secured term loan with a group of its largest bondholders. The company also announced that it would restructure its liabilities to “provide additional liquidity and further strengthen its capital position.”

Increasing the company’s liquidity is necessary for CIT to “ensure that its important base of small and middle market customers continues to have access to credit.” The company had announced late last week that there was “no appreciable likelihood” of receiving additional government support, and that the company would seek other sources of funding and other “alternatives to improve [CIT’s] liquidity.”

The $3 billion secured term loan, which has a maturity of 2.5 years, will be used to finance the first step in CIT’s recapitalization plan: a cash tender offer for its outstanding floating rate senior notes that come due on August 17, 2009. With respect to these notes, CIT proposes to pay $825 for each $1,000 principal amount tendered on or by July 31, 2009 or $800 for each $1,000 principal amount tendered on or by August 14, 2009. The tender offer is conditioned on noteholders tendering (and not withdrawing) 90% of the aggregate principal amount of the outstanding notes. The lenders under the new $3 billion secured term loan have already agreed to tender all of their notes. CIT will continue to develop its recapitalization plan, which may later include “comprehensive exchange offers.”