Newcourt Credit Group Inc.'s stock has rebounded from worries that the company's sale to CIT Group is in jeopardy. Can its bonds follow suit?

The markets have seen CIT's $4.1 billion deal as in jeopardy ever since May 5, when Newcourt, a Toronto-based equipment financer, reported below- average earnings.

Yet the stock bounced back to $16.625 at the close of markets Friday, from a low of $16 Wednesday, spurring some optimism that the bonds could rally as well.

"That gives a little bit more confidence that some sort of deal is in the offing," said Ann Maysek, an analyst for Bear, Stearns & Co.

Bids on Newcourt bonds maturing in 2005 leaped as much as 150 basis points over U.S. Treasuries on Friday, according to some traders and analysts. The movement has also been nudged along by recent widening of all corporate bonds.

Newcourt has about $10 billion in medium-term and term-debt notes outstanding.

The new trading level is nothing like the 200 to 300 range in which the bonds were trading at last fall. Still, the spreads were much wider Friday than before the May 5 news, when some of the company's bonds were trading at less than 100 points over Treasuries.

The wider spreads have led to some bullishness among bond analysts, buoyed by optimism that the deal will go through as is or can be revised by a tinkering of the stock exchange ratio.

"We cannot envision what additional negative news might cause the market to further punish Newcourt's debt securities," Ms. Maysek said.

Making matters challenging for Newcourt is a provision canceling the deal if Newcourt's earnings fail to meet 75% of equity analysts' average estimates for the first and second quarters.

Still, Ms. Maysek said she remains confident that Newcourt can make up the gap in future quarters by ramping up its lending and booking securitization gains.

Newcourt can be expected to pull out all the stops to consummate the deal, observers said. A failed acquisition-after due diligence conducted by CIT, which is based in Livingston, N.J.-would only validate concerns of spooked investors.

"The cards are definitely in CIT's hands on whether the deal gets done or not," said Mark Girolamo, a bond analyst for Deutsche Bank Securities in New York. "The issue is if the deal were not to go through, there is more widening (of bond spreads) to come. How much is hard to say."

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