CIT agrees tentative bondholder deal; Asian shares up
NEW YORK (Reuters) - U.S. lender CIT Group Inc (CIT.N) has reached a tentative deal with bondholders for $3 billion in rescue financing, sources said, as it tries to avoid becoming the latest casualty of the global crisis.
Asian stocks rose to a 10-month high, boosted by news of the CIT refinancing plan and hopes of a recovery in corporate earnings in the months ahead.
Record low global interest rates and trillions of dollars in stimulus spending appear to be helping the world recover from the worst recession in 80 years.
But more state money may yet be required, with the German government considering a U.S. style bank rescue plan that would use public funds to recapitalize banks, a German newspaper reported on Sunday.
China has committed to spend around $585 billion in stimulus spending and has encouraged its banks to lend more freely to support the economic growth it needs to create jobs and ensure the stability so craved by Beijing.
However, the country's top banking regulator on Sunday warned of the risks from surging bank lending, singling out the dangers of unhealthy growth in the property market.
Liu Mingkang, the head of the China Banking Regulatory Commission, said bank lending had helped stabilize the economy so far but made one of his strongest calls yet to banks to guard against taking excessive risks.
"In the first half of the year, our country's banking loans expanded rapidly and helped play an important role in stabilizing the economy, but the loans growth has led to accumulated risks also increasing," he was quoted as saying in a statement on the China Banking Regulatory Commission website (www.cbrc.gov.cn ).
CIT NEARING DEAL
The U.S. government has also committed to spending hundreds of billions in stimulus and has bailed out financial institutions including insurance giant AIG (AIG.N), but talks over a Washington rescue of CIT collapsed last week, leaving it to strike a rescue deal with its bondholders.
The board of CIT, which lends to nearly one million small and mid-sized businesses, approved a $3 billion deal with bondholders late on Sunday, a source close to matter said.
An announcement was expected before U.S. markets open on Monday.
Asian shares rose to their highest since September last year on Monday, helped by the CIT news, while both the dollar and the yen fell as risk appetite rose. <MKTS/GLOB>
MSCI's measure of Asia-Pacific stocks outside Japan .MSCIAPJ rose 1.8 percent, on track for a fifth consecutive session of gains and taking its year-to-date advance to more than 36 percent.
"CIT news comes as positive news ... but we need to wait how the financing plans unfold, and how investors in the United States react," said Kim Seong-bong, a market analyst at Samsung Securities in Seoul.
Japan's markets were shut for a public holiday, keeping trading volumes relatively low.
Much will now depend on the U.S. second-quarter earnings season, which powers up this week with more than a quarter of the companies in the Standard & Poor's 500 Index .SPX reporting earnings.
Investors will turn their attention to household names such as American Express Co (AXP.N), Apple Inc (AAPL.O), Boeing Co (BA.N), Coca-Cola Co (KO.N), McDonald's Corp (MCD.N) and Microsoft Corp (MSFT.O) to see what the earnings of these dominant corporations say about the U.S. economy's health.
(Writing by Lincoln Feast; Editing by Nick Macfie)
