Fortune 500 lender CIT Group sells off units for $1.8 billion to exit home lending

02 July 2008

Commercial lender CIT Group Inc. agreed to sell its home lending business to private equity firm Lone Star Funds for $1.5 billion in cash to increase liquidity, and will take a related second-quarter charge of $2 billion.

CIT also agreed to sell its $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance Inc for about $300 million. Coming after four consecutive loss-making quarters, this news lifted the company's stock by as much as 13 per cent. Before this, the stock had lost 75 per cent of its value in 2008.

''These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class, and advances our strategic transformation into a company focused entirely on commercial finance,'' CIT CEO Jeffrey Peek said.

Earlier in May, he had said that CIT would try to raise as much as $12 billion through asset sales and financings, after it drew down $7.3 billion of emergency credit, cut the dividend and sold shares.

Consecutive quarterly losses, including $249.7 million in the first quarter of 2008, had led to concerns on its survival. Goldman Sachs Group Inc. agreed last month to provide $3 billion in financing.

Dallas-based Lone Star will also be taking on $4.4 billion of outstanding debt and other related liabilities. It is investing a $5 billion fund that targets financial and real-estate assets.