Goldman in talks to extend its CIT loan
LLOYD Blankfein, chairman of Goldman Sachs, is in talks with CITGroup which could see the investment bank’s $3bn (£1.88bn) loan to the stricken lender extended.
In the latest of a series of lifeline deals designed to save ailing CIT, Goldman is considering changing the terms on an emergency loan it made in June 2008 to save the lender from collapse.
Meanwhile, Goldman would be due a payment of about $1bn if CIT Group was to file for Chapter 11 bankruptcy protection.
CIT would be required to hand over the giant sum as a “make-whole payment” under the agreement.
Goldman sources yesterday stressed that the payment would not be a windfall, but that the $1bn simply represents the present value of the spread to be earned over the life of the facility.
Beyond the $1bn payment from its rescue package, Goldman would also receive payment from credit insurance it holds if CIT were to go bankrupt.
Goldman is likely to agree to let CIT delay payment on some of the amount.
A Goldman executive said yesterday that the credit insurance was not a directional bet on CIT and was bought to protect against the possibility of a precipitous decline in the value of its collateral.
Goldman’s rescue of CITcame before the US government bought $2.33bn of CIT preferred shares in December in a bid to prop up the troubled lender.