Baupost Participates in CIT Rescue Loan

[snailslug]

http://www.hedgefund.net/publicnews/default.aspx?story=10256

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=azn_i2mJOiuw

CIT would pay interest of 10 percentage points more than the three-month London interbank offered rate, the people said. Libor, a lending benchmark, is 0.51 percentage point.

 

Ouch.

[Rabbitisrich]

On face value it looks like Baupost made a great deal.

 

From the 8-k filed today:

 

The Credit Facility has a two and a half year maturity and bears interest at LIBOR plus 10%, with a 3% LIBOR floor, payable monthly. It provides for (i) a commitment fee of 5% of the total advances made thereunder, payable upon the funding of each advance, (ii) an unused line fee with respect to undrawn commitments at the rate of 1% per annum and (iii) a 2% exit fee on amounts prepaid or repaid and the unused portion of any commitment.

 

The Credit Facility will be secured by a perfected first priority lien on substantially all unencumbered assets of the Guarantors, which shall include 100% of the stock of CIT Aerospace International, and 65% of the voting and 100% of the non-voting stock of other first-tier foreign subsidiaries (other than direct subsidiaries of the Company), in each case owned by a Guarantor.

 

The covenant requires the ratio of the book value of the collateral securing the Credit Facility to the loans outstanding thereunder to exceed 5:1 as of the end of each fiscal quarter commencing as of the fiscal quarter ending September 30, 2009, and the ratio of the fair value of the collateral securing the Credit Facility to the loans outstanding thereunder to exceed 3:1

[Guest kawikaho]

Wow, what a sham.  That deal just reeks of desperation.  I may have to go short on CIT again.  Even if they come through with the equity swap, they will have to pay huge interest payments on these loans.  And, what happens if they need another loan?  Most of their good collateral is tied up at 5:1 through these agreements.  This is a heads I win, tails, I still win deal for Baupost.  Definitely not good for CIT. 

[Guest kawikaho]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiJwhWb4QleU

[Guest kawikaho]

These deals are almost unconscionable. 

[nodnub]

These deals are almost unconscionable. 

 

I don't understand..  Do you mean you blame management or you blame the lenders for an unconscionable deal? 

 

When lenders are in short supply, willing lenders with available capital can dictate their terms.  Throughout history this has always been the case.  Don't you agree?

[Guest kawikaho]

I blame the management for getting in this predicament, but I blame the lenders for such an unfair deal.  That's what I call loan sharking.  It's like, if you don't pay this back and go bankrupt, we're gonna knee cap you still.  It's quite apparent that CIT is stupid enough to be raked by a crappy deal.  

 

It's too bad I can't short these idiots again.  Maybe I'll try to sell a bunch of calls.  Or, maybe I'll have to short some other stupid company like AIG.