Monday, October 19, 2009

Icahn is (rightly) outraged at CIT's board (CIT)

With a "knock-down, drag-out fight" brewing among CIT's creditors, stockholders have very little chance of coming out ahead(as in, with a stock worth anything). It would be like me, Brad Pitt and George Clooney all trying to impress a woman - I might think I have a chance, but I'd very likely be very WRONG.

Carl Icahn has offered CIT an alternative loan to the debt restructuring the company has attempted to pull off. He thinks it's an attempt for the current board and management to .

Bloomberg reports:

Earlier today, Icahn released a letter to CIT’s board calling the amended debt exchange the lender is offering “incompetent and unconscionable.” The exchange would swap $29 billion of securities and reduce debt by at least $5.7 billion after CIT was locked out of the unsecured debt markets it relies on for funding. At the same time, CIT is asking bondholders to vote on a prepackaged bankruptcy plan.

Fair Value

Icahn’s plan would provide a better alternative than “shamelessly offering certain large unsecured bondholders the opportunity to purchase $6 billion in secured loans in the company at well below fair market value,” he said in the letter.

As I've detailed before, in this "balance sheet shuffle," there is precious little remaining for common stockholders.

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