CIT Group Inc's
Under the terms of a rescue loan CIT received in July, Thursday is the deadline for the company to come up with a restructuring plan agreeable to lenders.
On Wednesday, sources close to the situation said the company would offer its unsecured debt holders two options -- either exchange their debt voluntarily or face a prepackaged bankruptcy.
CIT declined to comment on Thursday. The source who reported the board meeting declined to be identified because talks are not public.
CIT shares were down 6 cents, or 5 percent, at $1.15 in midday trading on the New York Stock Exchange.
Its bonds were mixed. The 7.625 percent bond due 2012 was the most actively traded, rising 1.5 cents to 66 cents on the dollar, according to MarketAxess.
The exchange offer is likely to essentially turn the company over to bondholders, sources said on Tuesday.
Debt investors would get some combination of new debt secured by assets and shares in the company. CIT's overall debt levels would shrink.
CIT plans to encourage bondholders to swap their notes by threatening a prepackaged bankruptcy, which could require approval by holders of only about two-thirds of the company's debt.
CIT's longer-term plan is to essentially turn itself into a bank. The company is one of scores of lenders and underwriters that relied on bond markets to fund their operations, only to suffer as the credit crunch has raged for two years.
CIT received $2.3 billion in December under the government's Troubled Asset Relief Program (TARP), but federal regulators this year rejected requests by CIT for more help.
In July, CIT bought some time to restructure with the help of a $3 billion emergency loan from a group of bondholders. That loan imposed the Thursday deadline for a restructuring plan.
(Reporting by Paritosh Bansal, Karen Brettell and Dan Wilchins, editing by Gerald E. McCormick and John Wallace)