NEW YORK, Oct. 23 /PRNewswire/ -- Carl C. Icahn issued an open letter to the bondholders of CIT Group today. Attached is the full text of the letter. CARL C. ICAHN TO: CIT GROUP BONDHOLDERS October 23, 2009 Ladies and Gentlemen: I have learned over the years that the best investments are based on simple concepts; I call these "no brainers." I believe that the CIT bonds would qualify as just such an investment with one caveat; we, the bondholders, must not endanger the value of our investment by voting for the Exchange Offer/pre-packaged bankruptcy plan currently proposed by the company. CIT's balance sheet is comprised of a diversified pool of loans and assets which will generate huge cash inflows over the next few years. If these assets are "run off" in a controlled way, we believe our bonds are worth par and in no event less than 80-85% of par value. However in the company's plan, the assets will not be wound down; rather, they will be reinvested in an operating business controlled by the company's current Board of Directors. This is the same Board and senior management team that has presided over the demise of our company by making Titanic-sized errors, some of which we believe were the result of gross negligence. The company's stated strategy is to run a "bank-centric" operating business by transferring several of the business platforms into the Utah bank. While we are not against trying to grow the value of these platforms, we are opposed to doing so at the risk of the about $65 billion of asset value mentioned above. The company's plan would put our assets at peril. There are several major pitfalls in their plan: 1) in order to keep operating the businesses prior to their transfer, the company is going to continue to reinvest as much as $15-20 billion of loan proceeds as they are repaid, rather than returning the money to bondholders (given the company's track record, chills run through me thinking of the current team investing our money); 2) corporate overhead will be several hundred million dollars per year higher than it needs to be in order to keep these businesses alive; and 3) the company will continue to operate as a bank holding company, which means that no matter how poorly they perform it will be almost impossible to significantly the Board. The senior management and board have received large perquisites over the years, even as they have bankrupted CIT by making major strategic errors (such as the Goldman Sachs transaction, which is one of the worst financings in corporate history and will require our company to pay an outrageously large prepayment penalty upon default or cancellation). The perquisites, including large bonuses as well as donations to personal causes, were not cut back even when the company kept bleeding our money on the path to bankruptcy. The board and senior management are now asking us to "bail them out" by approving a pre-packaged plan which would 1) give them control of an operating company which is losing $1 billion/year, with all the freedom to continue with their attendant perquisites, 2) give them releases for past mistakes (and I believe there were many), and 3) provide funding, with our money, for ongoing operations, even though they are in the red. Even more unconscionable is the fact that the company is using our money to purchase votes for its Exchange Offer/Pre-Pak. The company is currently arranging a financing. The economics offered to prospective lenders are well in excess of what the current syndicated loan market should dictate, given the loan's collateral coverage. However, in order to participate as a lender and purchase this undervalued loan, you must be a large bondholder and vote to accept the company's Exchange Offer and/or pre-packaged plan. Rather than doing a financing on the best possible terms for the company, the Board has decided to over-pay for this debt to buy votes for their plan. Would you vote for a governor who used state funds to buy votes? Not only wouldn't you vote for him, you would throw him in jail! We are currently offering an alternative financing that would save the company $150 million and wouldn't require bondholders to vote either way. Many bondholders have called us to express interest in our financing. One wonders if the company even tried to get cheaper financing, and if they did, how they could possibly have failed to do so. The company should be aware that if they buy votes through this loan, we will fight the debt sale and the fraudulent election through the courts for as long as it takes. Meanwhile, Houlihan Lokey, purported advisor to the bondholders, recommends the company's plan. But Houlihan has their own agenda. They have already received millions of dollars in fees from the company and continue to receive hundreds of thousands of dollars per month. If the Pre-Pak is approved they will receive millions of dollars in additional fees within a few months with virtually no risk. However, if the company files for a more traditional bankruptcy, Houlihan's outrageous fees could be challenged in court, and will likely take longer to collect. Little wonder why Houlihan has come down on the side of the company. Little wonder they have failed to challenge the waste of funds in the $6 billion "vote-buying" financing even though they purportedly represent our interests. CIT would have you believe that a bankruptcy would be calamitous. We do not believe this to be the case. Even in a traditional bankruptcy the company's assets would be protected and a run-off of assets would prove extremely profitable for bondholders. Additionally, in my opinion it would not take long to approve a plan that might include releases for the Board, which I believe they will be very interested in receiving. However, I am certainly not against arriving at a pre-packaged plan which might eventually include the transfer of the platforms into an operating bank. But it is complete obfuscation on the part of the company to say that the only way to get the government to approve the reopening of our bank is to keep the current Board in control. To me this is ludicrous. The government has shown no love for senior management or the Board. They have not only refused to bail them out, they have issued a cease and desist order on an otherwise healthy bank. What does this tell you they think of current management and the Board? Ironically, I believe the best way to get government approval to open the bank again is to rid ourselves of the Board and senior management team. Therefore, I have suggested the following compromise: 1) Reconfigure the proposed Board. Rather than allowing the current Board members to retain control, we would propose a 10 person board with current Board members comprising no more than 3 of the directors, the bondholders, or a committee of the bondholders, nominating 6 independent directors and the new CEO holding the final seat. We will agree that all of the nominees will be subject to approval by the regulators so that we can have the hope of reopening the bank. The company is misleading you when they tell you that in their plan we will have the opportunity to replace the Board at an annual meeting to take place in May, because as a bank holding company it is nearly impossible to have a proxy fight to replace the majority of the directors- make no mistake, the current Board wants to entrench themselves or their designees for the foreseeable future; 2) Tighten the cash sweep. We would eliminate the myriad carve-outs and other exceptions to the cash sweep to ensure that the majority of cash coming into the company is used to repay our debt; and 3) Provide for a discreet, nine month timeframe to allow for the transfer of the Vendor and Trade Finance platforms into the bank. If the government does not permit the transfers within that timeframe then the assets would be wound down and overhead reduced, with proceeds paid out to debt holders. I believe that bondholders should insist that the company put forth the pre-packaged plan as outlined above. It is time that the Board realizes that this company now belongs to the bondholders, not them. We need your support to prove this to certain members of the Board and management. It is important that you contact us and let us know your thoughts. Please reach out to either Vince Intrieri at (212) 702-4328 or Steve Mongillo at (212) 702-4343. Sincerely Carl C. Icahn DATASOURCE: Carl Icahn CONTACT: Susan Gordon, +1-212-702-4309

Copyright