Bondholders’ $3 billion loan saves CIT from bankruptcy

CIT Group, the 101-year-old commercial finance company, has agreed a deal with major bondholders to keep it out of bankruptcy with a $3 billion (£1.8 billion) rescue loan.

The funds give the New York-based lender a chance to restructure its debt outside of bankruptcy after the US government refused to give the firm a second bailout.

CIT, which has reported $3 billion of losses in the last two years, received a $2.33 billion rescue in December but has been scrambling to raise $2 billion to $4 billion more.

Under the deal, CIT's main bondholders will give the company $3 billion at an initial rate of 10.5%.

Bankruptcy would have threatened funding for scores of small businesses across America and wiped out the federal bailout money injected into the firm.

"We still think it is a losing effort in the intermediate term, although some bondholders end up better than others with this structure," said David Hendler, an analyst at CreditSights in New York.