What does struggling US commercial lender CIT have in common with peak oil?

Quite a lot, if a rather mysterious offer for some of CIT’s debt is serious. CIT is under pressure from activist investor Carl Icahn over its plan to reduce its $30bn debt load by almost $6bn. Icahn says the terms CIT is offering its existing bondholders to take part in the debt exchange are poor and would destroy the value of their assets.

One fund has offered to take on $1bn of that debt – and it’s apparently raising money for a peak oil fund. But it’s all a little intriguing, as Reuters reports:

NEW YORK (Reuters) – An obscure hedge fund said it offered to buy $1 billion in debt from CIT Group Inc (CIT.N) but declined to identify its source of capital. CIT would not comment on whether it was seriously considering the offer.

The fund, logi Energy, said it was interested in $1 billion of CIT’s middle market lenders debt portfolio.

Logi (or lower-case logi as it calls itself) is certainly somewhat mysterious – as BusinessInsider points out, its main website doesn’t work. Its energy fund website requires a very detailed registration that is only open for accredited investors. Then again, a mysterious hedge fund is almost a tautology. And while staying mum on the source of the financing, logi’s chief investment officer did talk to Reuters, if only to downplay the significance of their offer:

But Ortega told Reuters, “We have an institutional-class investor that is interested in supporting it.” The financing is contingent on CIT accepting the offer.

A spokesman for CIT declined to comment on the proposal. Analysts and energy investors said they had not previously heard of logi.

Ortega said he did not believe the debt offer was a game-changing deal for CIT.

“This is simply a hip pocket opportunity for them,” he said. “Those poor guys have a much bigger problems … CIT has a big chunk of oil and gas debt. We only want a sliver.”

Opec secretary-general Abdulla el-Badri told the Wall Street Journal that of those 35 Opec oil production projects said in February to be put on hold, seven were being re-started, thanks to buoyant oil prices.

The projects would be brought on stream over the two to four years and would produce 1.2m barrels per day, he said.

El-Badri, who has this year voiced caution about oil prices rising too quickly and dampening an economic recovery, sounds reasonably comfortable with the near-$80 levels seen recently. He said the oil environment was ‘becoming more healthy’ but he also voiced concerned about oil demand:

“The consumer wants security of supply….But we do need security of demand,” Mr. El-Badri said.

As the WSJ notes, the idea that oil demand will in fact peak in the near future is gaining traction – in a recent Deutsche Bank report, for instance, and in recent remarks from BP’s chief economist Christof Ruhl.

There’s no doubting that many oil production projects were delayed after prices began to fall dramatically in September 2008. But getting hold of detailed data on production from some Opec members is notoriously difficult.

The IEA in a paper for the G8 noted that Opec had not provided details of those 35 delayed projects, and the IEA’s own data had only identified 30 Opec projects that had been delayed, adding: “though it is unclear which of them have been deliberately stalled because of weaker demand and/or lower prices”.

Related links:

Deutsche: The end is night for the age of oil (FT Energy Source, 06/10/09)
Oil producers and consumers fret about future price spikes (FT Energy Source, 27/04/09)
Delaying investment projects: Who’s doing it, and why (FT Energy Source, 13/04/09)