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June 22 (Bloomberg) -- CIT Group Inc., the lender that exited bankruptcy in 2009, asked a bankruptcy judge to block a tax-related claim asserted by Tyco International Ltd.
“Providing any recovery on the equity claim would fundamentally alter the negotiated terms and economics of the plan approved by this court,” Lee Attanasio, an attorney for CIT, said in papers filed yesterday in U.S. Bankruptcy Court in Manhattan.
Tyco acquired CIT in 2001 through affiliate Tyco Capital Holding and sold its stake through an initial public offering the following year. The companies entered into an agreement as a condition of that sale that Tyco claims allowed it to write off CIT’s losses, court papers show.
At the time of the IPO, Tyco Capital’s net operating losses and other potential tax benefits were about $794 million at the federal level, according to court papers.
“The tax agreement was nothing more than a transparent attempt by Tyco to convert its prior equity holdings into future contingent equity payment,” attorneys for CIT said in court papers. They said the tax agreement was rejected under the terms of CIT’s reorganization plan, implemented in December 2009.
The company contends that Tyco’s claim falls under a section of the bankruptcy code that “mandates that any claim for damages ‘arising from the purchase or sale of a security of the debtor’ be subordinated.”
CIT, unable to win a second round of government assistance, was forced into bankruptcy after posting losses from subprime and student lending for 10 consecutive quarters totaling more than $6 billion.
The case is In re CIT Group Inc. v. Tyco International Ltd., 11-02267, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--With assistance from Michael Bathon in Wilmington, Delaware. Editor: Stephen Farr, Michael Hytha.
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