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North America - Best high-grade corporate borrower

CIT Group

Financial companies tend not to go independent these days: rather, many are looking for deep-pocketed acquirers. Look at last year's sale of Household to HSBC. With no other funding avenues available to it than the debt markets, Household was crushed by the credit meltdown of the second half of last year. Its spreads gapped out to more than 800 basis points over treasuries, and it was unable to raise capital. Selling out to a larger, more stable, better-rated institution was about the only viable option it had.

CIT Group, which also relies largely on bank lending and the capital markets for its funding, faced exactly the opposite dilemma. It spent much of 2002 having to rebuild its entire yield curve because of trouble at its parent company. CIT's executives had sold up in 2001 to what they thought was a larger, more diversified, more stable institution. At the time GE Capital was rumoured to be a bidder, but executives instead plumped for Tyco. Even before the deal had fully closed they were regretting it.

In January 2002, after years of espousing the creation of shareholder value through mergers and acquisitions, Tyco found itself the target of speculation about poorly managed integration and, more important at the time, of widespread investor concern at its overall corporate strategy and its over-reliance on commercial paper.

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