CIT bankruptcy is not off the table yet
By Daniel at 22 July, 2009, 11:05 am
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CIT bankruptcy may trigger another wave of job loss as 2,000 vendors that supply merchandise to 300,000 stores depends on CIT short term finance. However, repeating these is not going to get CIT stay in business as it doesn’t see profitable for a long while and it is insolvent. The government or private sector need to figure out a way to minimize the damage of CIT bankruptcy. FDIC refused to finance CIT after CIT received $2.3 billion from the government’s Troubled Asset Relief Program last fall is a clear sign that CIT bankruptcy is inevitable and necessary.
CIT Group warns that a bankruptcy filing is still a possibility despite receiving new $3B loan
“NEW YORK (AP) — CIT Group Inc. said in a regulatory filing Tuesday that it might have to file for bankruptcy protection if not enough bondholders participate in a recently launched debt exchange.
The commercial lender offered the grim assessment only a day after major bondholders agreed to provide it with a $3 billion rescue loan. CIT, one of the largest U.S. lenders to small and midsize businesses, was forced to scramble in recent weeks to line up new funding as it faced mounting liquidity pressure amid upcoming debt maturities and as customers tapped their credit lines.
CIT said in the filing with the Securities and Exchange Commission that the new loan might not provide enough relief to cover the liquidity squeeze.
CIT said it still needs to pay off about $7 billion in debt maturing over the next year, including $1 billion in August. It has launched an offer to repay that $1 billion in maturing debt at a discount.
Shares of CIT tumbled 27 cents, or 21.6 percent, to 98 cents Tuesday.
CIT was forced to turn to bondholders in recent days for help after the government refused to save the company last week.
CIT said late Monday it had reached a deal with key bondholders, including bond manager Pimco, to receive a 2.5-year secured loan facility.
That $3 billion loan comes at a high price — a minimum interest rate of 13 percent, according to the SEC filing.
“That’s an indication of the risk to the lenders,” longtime banking analyst Bert Ely said. “CIT is paying dearly for this credit.”
At the same time it agreed to the loan, CIT launched the cash-offer for $1 billion worth of senior notes due Aug. 17.
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http://finance.yahoo.com/news/CIT-says-bankruptcy-filing-apf-2442023652.html?x=0&.v=19
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