DBRS Downgrades CIT Group Inc. Long-Term Debt to C, Remains Under Review Negative

DBRS has today downgraded the Long-Term Debt of CIT Group Inc. and its related subsidiaries (CIT or the Company), to C from CC. The Company’s Issuer rating of CCC is unaffected by today’s rating action. All ratings remain Under Review with Negative Implications where they were placed on April 24, 2009.

Today’s rating action follows CIT’s announcement that it has commenced a restructuring of its capital structure through a series of private-exchange offers to exchange approximately $30 billion of its senior unsecured debt (the Existing Notes) for a series of newly issued secured notes of CIT (the New Notes) and voting preferred stock. The exact allocation of New Notes and preferred stock received will vary depending on the issuer, maturity date, and position of the Existing Notes exchanged. The New Notes will be secured by a second lien on certain of CIT’s assets.

Concurrently, holders of the Existing Notes have been presented a prepackaged bankruptcy plan that CIT could pursue should the exchange not be successful or if a meaningful portion of existing note holders vote in favor of this avenue for restructuring. In the prepackaged bankruptcy plan all existing note holders would receive New Notes and common stock of a post-bankruptcy CIT. DBRS notes that an acceptance of the aforementioned exchange offer by a debt holder also means the debt holder accepts the terms of the prepackaged bankruptcy plan. Alternatively, DBRS notes that bondholders may choose neither option and hold their current instrument

DBRS’s view this exchange offer as default under DBRS’s definition. The current debt is being exchanged for debt with less advantageous characteristics and an equity component, which DBRS does not view as full and like compensation. Moreover, given the sizable amount of the debt that is offered to be exchanged and the inclusion of the prepackaged bankruptcy plan option, DBRS views this proposal as coercive. Accordingly, the Long-Tern debt ratings have been lowered to “C” reflecting DBRS expectation that, upon completion of the exchange, the debt that is exchanged will be placed in a default status in accordance with DBRS policy. Conversely, should the exchange offer not be completed and CIT pursues bankruptcy, DBRS would place all debt and the Issuer Rating of CIT in a default status in accordance with DBRS policy. In the case that the Company is successful in executing the proposed exchange, any untendered Existing Notes will be rated at a level commensurate with the deeply subordinated position as any untendered notes would rank below the New Notes, the existing $3.00 billion secured credit facility, and a potentially enlarged secured credit facility. Upon completion of the restructure the New Notes will be assigned a rating by DBRS.

The Under Review Negative reflects the potential outcome of a bankruptcy filing still exists. However, should the exchange offer be successful, DBRS anticipates that the Under Review status may be revised to Developing reflecting DBRS’s belief that a successful exchange would be a long-term positive for the Company.

Notes:

All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is Corporate (Financial Institutions) rating.