TORONTO, Nov. 2 /CNW/ - ROC Pref II Corp. (the "Company") announces that the decision of the Board of Directors of CIT Group Inc. ("CIT") to proceed with a prepackaged plan of reorganization is expected to constitute a credit event under the credit linked note ("CLN") issued by HSBC Bank USA to which the Company has exposure.
In early October 2009, CIT initiated a series of voluntary exchange offers designed to recapitalize its balance sheet and significantly reduce its debt in an out-of-court restructuring. In addition to the exchange offers, CIT also solicited most bondholders and other holders of CIT debt to approve a prepackaged plan of reorganization so that CIT had the option to proceed with a voluntary bankruptcy filing.
The conditions for consummating the exchange offers were not met and all classes voted to accept the prepackaged plan. Approximately 85% of CIT's eligible debt participated in the solicitation, and nearly 90% of those participating supported the prepackaged plan of reorganization. Accordingly, CIT's Board of Directors approved CIT to proceed with the voluntary filings with the U.S. Bankruptcy Court for the Southern District of New York.
The impact of the CIT credit event on ROC Pref II Corp. will be known when the recovery rate is determined within the next several weeks. Before giving effect to the CIT credit event, a total of approximately 3.0 credit events among the companies in the CLN's reference portfolio could be sustained before payments under the CLN are impacted including the payment of $25 per Preferred Share on December 31, 2009 based on the assumption of a 40% recovery rate for each credit event. Realized recovery rates for any particular reference company may vary substantially from the assumed 40% recovery rate and the Company would not be able to sustain 3.0 credit events and pay $25 per Preferred Share at maturity if the realized recovery rates were less than 40%. Currently in the market place, the recovery rate is trading at approximately 65%. If the realized recovery rate for CIT is 60%, the CIT credit event would be equivalent to approximately 0.7 credit events at a 40% recovery rate. The realized recovery rate may differ from this level.
ROC Pref II Corp. is listed for trading on the Toronto Stock Exchange under the symbol RPA.PR.A and is scheduled to be redeemed on December 31, 2009.
This document may make forward-looking statements and there are risks that actual results could differ materially from forecasts, projections or conclusions in the forward-looking statements. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projections in the forward-looking statements and you may find additional information about such material factors and assumptions and the material factors that could cause actual results to so differ, in the prospectus for the Company and on an ongoing basis in the Company's management reports of fund performance. The above information should be considered as background information only and should not be construed as investment or financial advice. Further, it should not be construed as an offer or solicitation to buy or sell securities. Investors should read the prospectus and continuous disclosure documents available at www.cclcapitalmarkets.com or www.sedar.com, which further describe the risks and fees and expenses associated with an investment in the preferred shares of ROC Pref II Corp. and should consult with professional advisors before making investments decisions.
SOURCE Connor, Clark & Lunn Capital Markets Inc.
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