Newcourt Credit Group said Wednesday that discussions are continuing with its prospective acquirer, the CIT Group Inc., and that it expects its second-quarter results to meet conditions for the merger.
The announcement came amid speculation that CIT would back out of its agreement to buy Newcourt because the Toronto company missed first-quarter earnings targets.
Newcourt's stock has fallen more than 50% since the deal was announced March 8, and Tuesday it hit a 52-week low of $11.1875 a share. On Wednesday it rose 75 cents to $12.9375.
Newcourt said that teams from "both companies have worked together to advance the reassessment" and that discussions are continuing.
The statement reiterated a June 15 announcement that the two companies were in talks to proceed with the deal. "During this period, we have chosen to remain uncharacteristically quiet and not make any public comment," Newcourt said.
It also said Wednesday that CIT Group's June 15 and June 23 filings with the Securities and Exchange Commission have been misinterpreted.
The New York-based company said in those filings that it had given up its options to buy a 13% stake in Newcourt. The filings "may have been viewed incorrectly as incremental to the June 15 announcement. That is not the case," said Newcourt.
The Toronto company reported May 5 that net income for the first quarter was $36.1 million, or 24 cents a share, well below analysts' expectation of 35 cents. The shortfall was caused by the company's failure to securitize $1.1 billion of assets on schedule.
Insiders said that the snafu was caused by a human error. "They were so busy looking at this merger that they missed the securitization deadline by about 24 hours," said a former employee who did not want to be identified.
Analysts said the breakup fee that Newcourt will be required to pay if it backs out of the deal was reduced from $160 million to $50 million last month.
Moody's Investors Service has put Newcourt's debt on review for possible upgrading on expectations that the deal will close. "There's limited information available," said Moody's analyst Robert Young.