CIT Will Defer an Interest Payment

By APARAJITA SAHA-BUBNA and MAXWELL MURPHY CIT Group Inc. said it was forced to defer a $22.9 million interest payment due next month after failing to meet some conditions in the debt agreement. The payment was due Sept. 15, but a clause buried in the agreement stated that CIT must issue shares to finance the payment if it can't meet the conditions, or otherwise defer it. CIT said on Tuesday it was unable to sell shares and therefore was forced to delay the payment. The company's announcement comes amid its efforts to avoid a bankruptcy-protection filing. The century-old lender, run by Chairman and Chief Executive Jeffrey M. Peek, has been hurt by a liquidity crisis as its customers drew down credit lines in fear that they might disappear. Shares of CIT fell 27 cents, or 15.5%, on Tuesday, to $1.47. The stock fell more steeply than the broad decline in financial shares, as CIT investors worried that the company's prospects may be worse than expected. The stock is down nearly 68% this year. CIT is "trying to conserve liquidity and extract what it can from all stakeholders," said Sameer Gokhale, an analyst at Keefe, Bruyette & Woods. Mr. Gokhale has an equivalent of a "hold" rating on CIT's stock. CIT's deferral of the interest payment on its subordinated notes, due 2067, is permitted according to rules governing the security. This deferment doesn't mean that CIT is in default. CIT's outstanding notes traded lightly in a generally quiet high-yield bond market Tuesday. CIT's 5.8% notes due 2011 were the most active CIT issue, gaining a quarter point to 60 cents on the dollar, said online bond trading platform MarketAxess, which didn't list any Tuesday trades for the 2067 notes. CIT said in a regulatory filing Tuesday that it provided investors with a notice of continuance Monday as the company continues to be in violation of the covenants, or rules, governing the security. Write to Aparajita Saha-Bubna at Aparajita.Saha-Bubna@dowjones.com and Maxwell Murphy at maxwell.murphy@dowjones.com