CIT Bonds Trade Like High Grade

CEO Thain persuades investors that lender’s debt is creditworthy.

Less than three years after CIT Group Inc. completed its bankruptcy reorganization, Chief Executive Officer John Thain is persuading investors that its debt is as creditworthy as an investment-grade firm.

The average yield investors demand to hold the bonds of CIT rather than U.S. Treasuries fell to 310 basis points as of Aug. 17, according to Bank of America Merrill Lynch index data. The average spread on an index of BBB-rated financial firms that includes Axa SA and American Express Co., which is at least three grades above junk-rated CIT, was 349 basis points.

Emergency Credit

CIT’s bond sale last month had its lowest coupons on record for similar-maturity securities, Bloomberg data show.

Bank-Centric

S&P boosted the firm to BB- on March 9, three levels below investment grade. CIT has “shifted towards a more bank-centric business model: It has repaid or refinanced a material portion of its high-cost debt, increased deposits, and moved many U.S. originations to its commercial bank subsidiary, CIT Bank,” analysts Brendan Browne and Rian Pressman said in an April 16 report.

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