Global commercial finance company CIT has agreed to sell its home lending business, consisting of $9.3 billion in assets and related servicing operations, to Lone Star Funds for $1.5 billion in cash and the assumption of $4.4 billion of outstanding debt and other related liabilities. The servicing centers, which employ approximately 300 people, are located in Marlton, N.J. and Oklahoma City, Okla.
In a separate transaction, CIT agreed to sell its approximately $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance Inc. for approximately $300 million. Net cash proceeds from the two transactions are expected to be approximately $1.8 billion.
In the second quarter of 2008, CIT expects to record an estimated pretax loss for the home lending segment of approximately $2.5 billion ($2.0 billion after tax). This loss consists of an estimated $2.2 billion loss on sale and an approximate $350 million loss from operations during the period. Home lending will be accounted for as a discontinued operation.
The sale of the portfolios is scheduled to be completed in July, while the transfer of the servicing platform will be completed by the first quarter 2009.
Source: CIT