DBRS Assigns Rating of BB to CIT Group’s Revolving First Lien Credit Facility, Trend Positive

DBRS Inc. (DBRS) has today assigned a rating of BB to CIT Group Inc.’s (CIT or the Company) $2.0 billion Revolving First Lien Credit Facility (the New Facility). The trend on the rating is Positive. Concurrently, DBRS has withdrawn the ratings of the existing First Lien Facility (the Old Facility), which has been repaid in full and terminated with proceeds from the new facility and cash on hand.

The rating considers the secured position of the New Facility, which benefits from a first lien on substantially all U.S. assets of CIT that are not otherwise pledged to secure the borrowings of special purpose entities and the equity of certain foreign subsidiaries, consistent with the Old Facility. However, should CIT fully extinguish its Series A Notes, all the collateral and subsidiary guarantees under the New Facility will be released except for guarantees from eight of CIT’s domestic operating subsidiaries. The New Facility will also benefit from a minimum guarantor asset coverage ratio. At June 30, 2011, CIT had approximately $8.8 billion of Series A Notes outstanding. While DBRS recognizes the benefit of the guarantee, DBRS views this guarantee as providing less certainty as to timely recovery than that of the perfected first lien. Given the potential for the removal of the perfected lien, DBRS’s rating of the New Facility reflects the expected recovery under the guarantee.

Consistent with DBRS’s methodology for rating secured instruments, DBRS rates the New Facility two notches above the Issuer Rating. The notching reflects DBRS’s view that recovery, in the case of default, will be greater than 70%. Moreover, this view on the recovery reflects the overall quality of the assets and the values of the assets.

The Positive trend on the New Facility is consistent with the trend on CIT’s issuer rating. The trend reflects DBRS’s expectations that CIT will continue to make progress in improving and diversifying its funding profile, expanding the role of CIT Bank, and restoring growth in the Company’s four core business segments, while restoring underlying profitability. To that end, DBRS views the New Facility as providing CIT with more cost efficient funding while improving financial flexibility as certain covenants are less restrictive relative to the Old Facility.

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

The principal applicable methodology is Rating Finance Companies Operating in the United States, which can be found on our website under Methodologies.

The sources of information used for this rating include publicly available company documents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Steven Picarillo
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 17 May 2010
Most Recent Rating Update: 16 June 2011