Case | HBS Case Collection | October 2013

Oaktree and the Restructuring of CIT Group (A)

by Victoria Ivashina and David Scharfstein

Abstract

CIT's prepackaged bankruptcy marked the first time a major financial institution was able to successfully restructure and emerge from Chapter 11 bankruptcy, challenging conventional views that a financial firm could not survive bankruptcy proceedings as a going concern. A diverse group of private investors that had accumulated a large position in CIT in the period leading up to the restructuring played a central role in the success of this restructuring. The case protagonist is Rajath Shourie, Managing Director at Oaktree Capital Management. Shourie evaluates the opportunity to extend a $3 billion rescue credit facility to CIT, together with five other large creditors of the struggling bank. The decision takes place just one day after CIT was denied access to the Temporary Liquidity Guarantee Program (TLGP). This case provides a platform for discussing what constitutes a good attractive distressed target. (In parallel, students can gain in-depth insight into alternative financing models of corporate lenders, including banks and finance companies.) The second major component of the case concerns distressed debt investment strategies, and provides an illustration of turning an investment in public debt into a position of control over CIT's management and the restructuring process.

Keywords: Debt Securities; Restructuring; Financial Services Industry;

Citation:

Ivashina, Victoria, and David Scharfstein. "Oaktree and the Restructuring of CIT Group (A)." Harvard Business School Case 214-035, October 2013.