NEW YORK (Reuters) - CIT Group Inc <CIT.N>, a commercial finance company trying to raise cash amid the global credit crisis, on Tuesday said it sold $1.5 billion of common stock and convertible preferred stock, 50 percent more than planned.
By Jonathan Stempel
NEW YORK (Reuters) - CIT Group Inc <CIT.N>, a commercial finance company trying to raise cash amid the global credit crisis, on Tuesday said it sold $1.5 billion of common stock and convertible preferred stock, 50 percent more than planned.
The offerings dilute the holdings of existing shareholders, and CIT shares fell $1.77, or 13.9 percent, to $10.95 in morning trading.
New York-based CIT said it sold $1 billion of common stock, comprising 91 million shares at $11 each. It also sold $500 million of preferred stock carrying an 8.75 percent dividend and convertible into CIT stock at $12.65 per share.
!ADVERTISEMENT!Net proceeds from the offerings total about $1.44 billion, CIT said. It said it may increase both offerings 15 percent, potentially increasing gross proceeds to about $1.73 billion.
Like many other finance companies that cannot borrow from the Federal Reserve, CIT has been raising cash to help meet its obligations and fund new business. In March, it said it drew down its $7.3 billion of bank credit lines.
"We would assume that management expects that the additional capital would allow them to either access more sources of liquidity or allow for incremental asset sales," wrote Credit Suisse analyst Moshe Orenbuch.
Though he rates CIT "outperform," Orenbuch cut his price target on the stock to $17 from $22. He also lowered his 2008 profit forecast for CIT to $1.80 per share from $2.75, and said the offerings are about 25 percent dilutive.
CIT said it intends to use net proceeds for general corporate purposes, including payment of $8 million of preferred stock dividends this quarter and $23 million of interest on junior subordinated notes in the third quarter.
Last week, CIT posted a $257.2 million first-quarter loss, slashed its dividend 60 percent, and said it may sell its railcar leasing business to raise cash.
It also said it has agreed to sell more than $5 billion of assets and loan commitments, and has identified an additional $2 billion of loan assets it may finance or sell. CIT also said it has enough cash to meet its obligations this year.
Citigroup Global Markets Inc, JPMorgan, Lehman Brothers Inc and Morgan Stanley arranged the stock offerings, CIT said.
(Editing by Maureen Bavdek and John Wallace)
