Goldman Sachs May Amend CIT Loan

Goldman Sachs Group Inc. (GS) is contemplating to amend the terms of a $3 billion loan which it had given to struggling lender CIT Group Inc. (CIT) to enable it to continue using the facility.

The investment bank extended a 20-year funding to CIT in Jun 2008. According to the terms of the contract, CIT will pay Goldman 2.85% of the maximum amount lent, which would come to about $85.5 million annually for the first 10 years of the agreement. CIT would be required to pay $1 billion if it files for Chapter 11 bankruptcy.

CIT, one of the nation’s largest lenders to small and midsize businesses, received $2.3 billion in federal bailout funds last year. In July, the company secured a $3 billion emergency loan from some of its largest bondholders, evading an immediate bankruptcy filing. But the company still needs to reduce its massive debt burden to avoid collapse.

Ravaged by the downturn in the credit markets, CIT has been trying to avoid bankruptcy for months as it continuously attempts to restructure its operations. CIT is looking at a number of different options that would reduce the $1 billion payment. The company is working out an option with bondholders with about $31 billion in debt to swap it for a new secured debt worth at least $5.7 billion and further extend debt maturities.

At the end of July 2009, CIT secured a $3 billion rescue loan from a group of its largest bondholders including Pacific Investment Management, Oaktree Capital, Silver Point Capital and Centerbridge Partners.

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