Bonds issued by a Canadian unit of embattled CIT Group Inc. (CIT) are trading at a rapid clip.In the filing, CIT disclosed that its wholly owned finance subsidiary CIT Group Funding Co. of Delaware sold $2.2 billion of unsecured debt and lent the proceeds to an affiliate to fund its business. At the time this debt was issued, CIT Group Funding was a "legal Canadian entity", according to the filing. If CIT were to file for bankruptcy, this could mean holders of these bonds have an extra claim
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The 5.2% bonds of 2015, which were sold by CIT Group Funding Co., had changed hands 42 times by noon, according to online trading platform MarketAxess, making it by far the most active of CIT's bonds Tuesday. These bonds are 3.875 points higher at 73.875 cents as a result of the activity.
The firm, which is battling to avoid bankruptcy, Monday posted a $1.62 billion loss for the second quarter as it borrowed funds at a higher rate than it loaned out and squirreled away reserves to account for future losses. The net loss of $4.30 a share for the quarter ended June 30 compares with red ink of $7.88 a share a year earlier, when the company reported a $8 charge per share from discontinued operations.
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