by Calculated Risk on 7/19/2009 05:52:00 PM

From the WSJ: CIT cuts deal with key bondholders for $3 billion in financing. CIT will avoid bankruptcy, restructure outside court. (ht Noah at UrbanDigs in NY)

UPDATE: From WSJ: Bondholders Plan CIT Rescue

The deal, which was being considered by CIT's board Sunday night, charges CIT very high interest rates, and it doesn't permanently fix the company's long-term financing needs ... Under the proposal, CIT would likely pay interest rates 10 percentage points above the London interbank offered rate, said these people. ... CIT has also agreed to pledge some of its highest-quality loans as collateral on the $3 billion package.

The new loan could act like a "bridge" to a series of debt-exchange offers that CIT would launch in order to get bondholders to swap some of their bonds for equity in the company or for new debt that matures later.

So it is a bridge loan while CIT tries for a debt-for-equity exchange or new debt. This is a short term fix, but probably gets CIT through the year.