CIT Group Inc.
), which has been redeeming notes for quite sometime now, announced
its decision to redeem the remainder of $681 million of its 7%
Series C senior unsecured notes. These notes mature in 2016 and
will be redeemed at par on a pro rata basis.
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CIT aims to complete the redemption on September 17, having already
issued the redemption notice to the trustees. The Series C notes
were issued in December 2009 as part of the company's
reorganization initiatives. Following the completion of this
redemption, there will be no high-cost debt left, except for the
unsecured revolving credit facility.
CIT has been constantly and quickly restructuring its balance sheet
in order to bring down its cost of capital as well as improve
profitability since it emerged from bankruptcy in December 2009.
With the completion of this redemption, the company would have
redeemed or refinanced approximately $31 billion of high-cost
long-term debt since 2010. Moreover, the redemption of the debt
would lead to an overall reduction of 250 basis points in the
CIT announced the redemption of debt for the second time this
month. On August 6, the company announced the redemption of $3.29
billion Series C senior unsecured notes that bear high interest.
Additionally, earlier this year, impressed by CIT's efforts to trim
down debt, stabilize its balance sheet and reduce funding costs,
Standard & Poor's (S&P) and Moody's Investor Service, the
ratings arm of
), upgraded the company's long-term Issuer Credit Ratings (ICRs).
We expect CIT to continue benefiting from its strong capital and
liquidity position. Apart from lowering its funding cost, the
repayment and refinancing of costly debt will improve its net
interest margin and profitability. Nevertheless, the sluggish
growth across the economy could mar the company's growth prospects.
Furthermore, the company will have to focus on improving its
top-line improvement; otherwise, its bottom line will continue to
remain under pressure.
CIT currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we also
maintain a long-term 'Neutral' rating on the stock.