CIT Grabs a Lifeline

Spurned by lawmakers and regulators in Washington, D.C., CIT Group finally may have grabbed a lifeline late last night when it "appear[ed] to have reached an agreement securing $3 billion in last-minute rescue financing from its bondholders," the Wall Street Journal reports. CIT (CIT) is set to receive $3 billion from some of its main bondholders; the money will buy the bank a few weeks to restructure by setting up an exchange of bondholders’ debt for equity, alleviating some of the pressure from billions of dollars in obligations, the New York Times writes. CIT was on the verge of filing for bankruptcy, but the rescue deal comes at a high price—the bondholder loan is being given at an initial rate of 10.5 percent—and only papers over the cracks of the 101-year-old institution's precarious finances. Still, if the deal is approved, it will strengthen CIT's financial position and "alleviate pressure on CIT to pay down $1 billion in debt that comes due in August. It may also preserve the U.S. Treasury's $2.33 billion investment made as part of the Troubled Asset Relief Program," writes the WSJ.

CIT's ability to raise private funds, along with new data showing that demand for the Federal Reserve's emergency short-term lending programs is abating, are two strong signs that the credit markets finally are healing, the WSJ reports. Securities dealers and investment banks haven't tapped into Fed lines of credit for 10 weeks, it writes; borrowing through a program set up to support the market for commercial paper is at less than one-third its peak level. How the banks that tapped into the Troubled Asset Relief Program used those borrowed funds has been the source of much conjecture in recent weeks, and signs of a rebounding bonus culture have grabbed headlines. Now a new study by the special inspector general of TARP reports that some 83 percent of the 360 recipients surveyed said that they had used funds from the government for lending. But "43 per cent [of the recipients also] said that they had bolstered their capital cushion, 31 per cent made other investments, 14 per cent repaid debt and 4 per cent made acquisitions," the Financial Times writes. The report is the most comprehensive survey to date about how the banks actually used the money they received, says the Washington Post.

Private-equity specialist Kohlberg Kravis Roberts has finally gone public ... in Amsterdam, the NYT reports this morning. In a somewhat convoluted deal, KKR announced it had merged with its European affiliate, KKR Private Equity Investors, "giving it an Amsterdam listing and the option to later pursue a public listing in New York." The arrangement ends a two-year saga for the buyout specialists, whose attempt to go public in the United States was hampered by the collapse of the credit market and the subsequent plunge in the equity markets last autumn. The merger also prompted a peek into KKR's books. According to the WSJ, assets under KKR management as of June 30 topped $50 billion, up from $47.3 billion as of March 31. And its quarterly net income will be between $345 million and $370 million.

What does a former Google (GOOG) ad executive know about display advertising, and, more importantly, will this knowledge turn around AOL? We will soon see. According to the WSJ, new AOL CEO Tim Armstrong, a former Google ad-sales executive, will hold a meeting before his entire AOL staff this Friday to lay out the company's path to recovery. "At a session partly aimed at building employee morale, Mr. Armstrong says he will highlight several goals, including making AOL the market leader in online display advertising and one of the world's biggest producers of digital content, such as Web sites and online video," the newspaper writes. Armstrong told Reuters that if investors hang with his plan and hold onto their shares following the Time Warner-AOL spin-off later this year, they'll see a nice return—that is, by 2011. "That will be a difficult sell to Time Warner shareholders looking at AOL's revenue trajectory over the last three quarters, which has seen steep declines of 20 percent," Reuters points out.

Finally, it's not just TMZ.com that remains obsessed with Michael Jackson. The NYT reports that a "handful of major financial firms have made inquiries into buying the Jackson estate's 50 percent share of Sony/ATV Music Publishing." That particular asset controls most of the Beatles song catalog and could be worth $500 million. As John Lennon sang: "The best things in life are free. But you can keep them for the birds and bees."