[DantesPeak]

The effects look to be wide spread.

$this->bbcode_second_pass_quote('', 'J')ULY 17, 2009 CIT Clients Scramble to Secure Lifelines

Worries about the fate of CIT Group Inc. cascaded through the retail and manufacturing industries on Thursday, as companies stopped shipments and businesses worried about cash being tied up at the lender should it file for bankruptcy-court protection.

The disruptions were an indicator of the potentially wide fallout from a failure of CIT, which was unable this week to persuade the government to provide financial assistance.

CIT is a lender to 950,000 mostly small and midsize businesses. It is one of the nation's biggest players in supplying credit and cash advances to clothing retailers and manufacturers, a business known as "factoring." CIT provides them cash upfront and over time, taking over the collection of their receivables and invoices.

If CIT were to seek bankruptcy protection, scheduled payments to customers could potentially be frozen by the court.

[Roy]

http://www.monitordaily.com/app_enews/news.asp?news_ID=23849

$this->bbcode_second_pass_quote('', ' ') Speculation Swirls Around CIT's 'Evaluating Alternatives' Announcement

CIT said late yesterday "there is no appreciable likelihood of additional government support" fueling speculation the company may be on the verge of bankruptcy. In a written statement issued after the market closed, CIT said it was "evaluating alternatives." A Treasury official said U.S. officials ultimately decided CIT's problems were too severe to be solved by any of the plans under review.

The Wall Street Journal, citing people familiar with the matter, said CIT was scrambling to line up at least $2 billion in rescue financing from existing bondholders. The Journal said CIT gave debt-holders 24 hours to decide if they will come up with new cash. The Journal said that the Federal Reserve conducted stress test on CIT Tuesday night and found the company would need $4 billion to cover losses under the most stressed economic conditions.

In a related story, Reuters said that many of CIT's businesses, including trade and transportation finance, could be of interest to potential buyers. Quoting a source, Reuters said that JPMorgan Chase would be the most logical suitor for portions of its businesses, noting that bank has the balance sheet and a lot of experience in asset-based lending. CIT's transportation businesses, which encompass railcar and aircraft leasing, may also be attractive to buyers currently operating in these segments. Reuters noted however that private equity buyers would be unlikely suitors because of CIT's high cost of capital, which would put them at risk, the article notes.

Bloomberg notes in a related story, quoting the president of a New York-based investment firm and CIT bondholder, that lending to small businesses wouldn't stop. The source said CIT's factoring business could be sold in a heartbeat to a competitor. "It has the best technology in the industry and is CIT's crown jewel."

[nobodypanic]

$this->bbcode_second_pass_quote('DoomWarrior', '')$this->bbcode_second_pass_quote('patience', 'W')onder how long the Federal guarantees will be credible? If the bond market tanks, nobody will give credence to the "full faith and credit" of the US govt, when the govt has no borrowing ability. That could be the end game.

[DantesPeak]

CIT said to be in denial.

http://www.bloomberg.com/apps/news?pid= ... xblWMCEuDg

$this->bbcode_second_pass_quote('', 'C')IT Group’s Banks Said to Weigh Bankruptcy Financing (Update1)

By Pierre Paulden, Caroline Salas and Elizabeth Hester

July 18 (Bloomberg) -- CIT Group Inc. advisers, including JPMorgan Chase & Co. and Morgan Stanley, are discussing options for funding the lender if it enters bankruptcy, people with knowledge of the matter said.

JPMorgan and Morgan Stanley are talking with other banks about a debtor-in-possession loan, used to fund a company’s operations after it seeks court protection from creditors, according to the people, who declined to be identified because the negotiations are private. CIT and its advisers, including Morgan Stanley and Evercore Partners Inc., are also trying to arrange rescue financing to avert bankruptcy, they said.

CIT may need as much as $6 billion to avoid filing for bankruptcy protection after the U.S. wouldn’t give the firm a second bailout, according to CreditSights Inc. A failure of CIT, which has almost $76 billion in assets, would be the biggest bank collapse by that measure since regulators seized Washington Mutual Inc. in September.

“This thing doesn’t have a future,” CreditSights analyst David Hendler said yesterday in a telephone interview. “Anything is possible but the problem is not solvable anymore. They’re just in denial it’s finally over,” the New York-based analyst said referring to the rescue financing.

The century-old lender that finances about 1 million businesses from Dunkin’ Brands Inc. to Eddie Bauer Holdings Inc. is “continuing to evaluate alternatives” after failing to convince the U.S. government to back its debt, the New York- based company said July 16 in a statement.

[wisconsin_cur]

Buying time?

$this->bbcode_second_pass_quote('', 'D')irectors of the CIT Group, one of the nation’s leading lenders to small and midsize businesses, approved a deal Sunday evening with some of the bank’s major bondholders to help it avert a bankruptcy filing through a $3 billion emergency loan, according to people briefed on the matter.

The deal will buy CIT some time to restructure its business model and reduce its voluminous debt load, after the company failed to win crucial concessions from Washington regulators. The company had planned to file for bankruptcy protection as soon as Monday afternoon if it could not attract enough capital from private investors, including big bondholders and its banks.

Under the terms of the deal, CIT would receive $3 billion from some of its main bondholders, though at an initial rate of about 10.5 percent. The money, arranged by Barclays Capital, is meant to give the company several weeks to set up an exchange of bondholders’ debt for equity, alleviating some of the pressure from billions of dollars in obligations.

[DantesPeak]

Well I already predicted the demise of CIT, but I want to make that prediction again for two reasons.

1 - The so called bailout deal has set nearly impossible terms of interest payments.

2 - In the bankruptcy case involving car part maker Delphi, lenders to the company after it declared bankruptcy may take huge losses. This would discourage new lenders to help CIT until it is almost reorganized.

This may take a few weeks or so to develop, and the government may yet intervene in this situation.


$this->bbcode_second_pass_quote('', 'J')ULY 22, 2009, 4:22 P.M. ET DealWatch
CIT Poses Lehman-Like Risk

By DONNA CHILDS and SAMEER BHATIA | A Dow Jones Newswires column

The implications of the capital crisis of CIT Group Inc. fill 24-hour news coverage and yet credit default swaps are near record lows and the markets appear calm, a peculiar disconnect given the events that followed Lehman Brothers' bankruptcy. What gives?

The century-old lender narrowly avoided a bankruptcy filing this week when it obtained $3 billion in loan commitments from its bondholders. Tuesday, documents filed with the Securities and Exchange Commission laid out steps that it will take to avoid bankruptcy, though it warned that any misstep likely would lead to a Chapter 11 filing. Who has correctly gauged the risk CIT poses to institutions, markets and the economy - the media, the markets or the government?

It appears anomalous that CDS spreads are near historic lows, despite a possible imminent collapse of an important commercial lender. So why haven't spreads moved significantly despite the media's scrutiny of CIT's crisis?

The likely reason is that markets clearly understood the systemic financial risk posed by Lehman's more than $350 billion counterparty exposure yet don't grasp the risks posed by CIT's exposure to the manufacturing, retail and commercial real estate sectors.

This may also explain why the U.S. government bailed out American International Group Inc., an entity it deemed too connected to fail given the significant counterparty exposure to other financial institutions, and yet appears unfazed by the risks posed by CIT.

Such a view is shortsighted. CIT factors the accounts of some 1 million small businesses, by which process it purchases their accounts receivable. In some cases, it advances cash against those purchases; in other cases, particularly with many Chinese institutions, it doesn't. Should CIT default, small businesses that believed they were borrowing from CIT would become unsecured creditors of CIT.

Many of those small businesses operate in the manufacturing, textile and garment industries. This appears to be a different type of risk exposure than that represented by Lehman or AIG yet it is nonetheless a real risk to the economy and by extension the global financial system.

The failure of Lehman precipitated a seizure in the credit markets from which the world has not yet recovered. The failure of CIT will likely precipitate similar seizures in both trade finance and commercial real estate markets. The attendant consequences will inevitably come back to haunt the larger financial institutions with exposure to these sensitive sectors.

[deMolay]

Is it unravelling yet. One of the largest bankruptcies in US history. http://www.theglobeandmail.com/report-o ... le1347273/

[deMolay]

Could be a Black Monday. http://www.bloomberg.com/apps/news?pid= ... bL2U&pos=1

[deMolay]

NIKKEI drops 277 out of the gate. http://www.bloomberg.com/?b=0

[eXpat]

[deMolay]

Pop goes the weasel.

[cipi604]

After Christmas, nothing important yet.

[Don35]

$this->bbcode_second_pass_quote('cipi604', 'A')fter Christmas, nothing important yet.

[Novus]

This is a sign of recovery that things are getting a bit less bad. CIT bankruptcy is no Lehman Brothers. Go Go Green Shoots

[eXpat]

$this->bbcode_second_pass_quote('Novus', 'T')his is a sign of recovery that things are getting a bit less bad. CIT bankruptcy is no Lehman Brothers. Go Go Green Shoots

[deMolay]

Tings is getting better. Nothing but green shoots.

[heroineworshipper]

$2,200,000,000 in printed money doesn't buy what it used to. Figured the collapse would resume once those $20 chicken breasts started hitting credit cards.

[Prince]

I'm confused about this whole CIT bankruptcy process. A few months ago Goldman gave them a loan, I thought, to avoid bankruptcy. Last week, Icahn injected $1B. Was this to speed up the bankruptcy or to avoid it? I guess I'm confused on the intentions of these plans were.

[IslandCrow]

$this->bbcode_second_pass_quote('', 'M')any observers predict that if CIT is able to continue in business after emerging from bankruptcy protection, it will not be able to make anything like the same number of loans to small businesses.

That could mean that thousands of companies which are looking to raise money for investment will struggle to find the cash, they warn.

[Tyler_JC]

Maybe they thought their investments would allow the company to avoid bankruptcy?

Or maybe they were making sure that when the company finally went belly up, they would be first in line to get the prime assets?

The only thing I know is that taxpayers just got robbed, again. We lent CIT billions of dollars and now we aren't going to see a dime of it.