CIT Approaches Bankruptcy After Striking Icahn, Goldman Accords

[Joanne98]

Source: Bloomberg

Nov. 1 (Bloomberg) -- CIT Group Inc., the 101-year-old commercial lender seeking to avoid collapse, may file for a prepackaged bankruptcy as soon as today after striking deals with billionaire Carl Icahn and Goldman Sachs Group Inc.

A prepackaged bankruptcy “is probably going to go through,” Icahn said Oct. 30. He will supply a $1 billion loan for “supplemental liquidity” that can be used as bankruptcy financing, the New York-based company said. CIT also said it reached an agreement with Goldman Sachs to keep a credit line open should the lender file for court protection.

The accords were disclosed the day after a deadline passed for CIT to solicit votes in support of either a $30 billion out- of-court debt exchange or a prepackaged bankruptcy. CIT is seeking to reduce debt by at least $5.7 billion after being locked out of credit markets it relies on for funding and posting nine quarters of losses totaling more than $5 billion.

“CIT has gotten its ducks in a row for filing,” Adam Steer, an analyst with CreditSights Inc. in New York, said in a telephone interview. “They can hopefully get out of the bankruptcy court faster, which may be better for debt recoveries.”

Under the prepackaged plan, CIT bondholders will get 70 cents on the dollar in the form of new notes and equity in the reorganized company. If CIT is forced into a “free-fall” bankruptcy, unsecured claims may fetch as little as 6 cents on the dollar, according to Jeffrey Peek, the company’s chief executive officer.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aCSEbhLRqHrc&pos=6

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This is terrible news. If the bondholders get 70% on the dollar that will leave CIT with NO MONEY to make loans to small business. Somebody in DC needs too set up loans there. Fuck the banks!

[ixion]

1. Ah, Goldman Sachs name crops up again

how very typical...

[phasma ex machina]

12. +1 Goldman Sharks are always hungry. nt.

[dkf]

2. The sad fact is that these loans probably don't have a good chance of doing

well. I've often thought the only thing that would get banks to loan to small businesses is a federal guarantee or barring that, direct loans from the Feds.

I mean would YOU loan your money to a small business in this environment?

[SpiralHawk]

3. NYT just reported that CIT declared bankruptcy a few minutes ago

http://dealbook.blogs.nytimes.com/2009/11/01/cit-to-file-for-bankruptcy-soon/?emc=na

This, my friends, is more more more of the Shock & Awe FAIL FRUIT of Republiconomics and RepubliconThink -- profoundly putrid sicknesses of the mind and soul.

[AllentownJake]

4. and the commercial real estate crisis begins

Finding lenders to re-finance commercial real estate loans...not going to be easy.

Forget the new loans...look at the ones already in existence.

[Joanne98]

7. I wonder what this will do to the market tomorrow. Stampede?

[AllentownJake]

8. Sector specific

Banks in commercial real estate will take a hit and REITs. I don't see why General Mills or Wal-Mart would take a hit off of this.

[girl gone mad]

14. It's been a long time coming..

so I think this news is priced in.

The Nikkei is down almost 3% on dollar weakness (v. yen). I don't think Asia's going to lead us out of this dip.

[BumRushDaShow]

5. MSNBC now citing AP report that it is done.

http://www.msnbc.msn.com/id/33576310/ns/business-us_business/

[Joanne98]

6. CHRONOLOGY-A century of CIT, from St Louis to New York

CIT Group Inc (CIT.N), a lender to a million small and
mid-sized U.S. businesses, filed for bankruptcy on Sunday.
The following is a collection of key dates of the 101-year old
business lender. 1908 - 37 year-old Henry Ittleson founds CIT in St. Louis.
Within three months, the business lender had 22 clients,
including chemical company Monsanto (MON.N). Seven years later
the company moves to New York. 1924 - CIT sells stock to the public and becomes the first
company of its kind to be listed on the New York Stock
Exchange. 1928 - CIT enters into factoring. 1929 - The company reports record earnings just a few
months after the 1929 stock market crash, and remained
relatively sound during the 1930s. It acquired companies to
boost its business, including Ford Motor's (F.N) financing
wing, Universal Credit Corporation. Over time, the company also
starts buying manufacturing businesses. 1969 - CIT abandons its auto financing business, and turns
to personal and home equity loans and equipment leasing. It
acquired a series of banks in the 1960s and 70s, but sold its
banking operations in 1979. 1980 - RCA Corp acquires CIT and sells its four
manufacturing businesses. 1982 - CIT moves to Livingston, New Jersey, a suburb of New
York. 1984 - RCA sells CIT to Manufacturers Hanover Trust
Corporation. The two companies combined became the largest
factoring unit in the world. 1986 - CIT transfers its consumer loan portfolio to
Manufacturers Hanover to focus exclusively on business
clients. 1992 - CIT reenters into the personal consumer market. 1997 - CIT holds an IPO and is relisted on the NYSE. 2001 - Tyco International agrees to buy CIT for about $10
billion, but is forced to spin it off to shareholders a year
later as Tyco struggles with a massive debt burden from such
acquisitions. 2003 - Jeffrey Peek is appointed chief operating officer,
with the expectation of becoming chief executive. Peek became
CEO in 2004. The company begins an aggressive expansion into
subprime and student loans. 2006 - CIT moves back to New York into a new, 28-story,
glass-encased tower at 505 Fifth Avenue. 2009 - CIT loses its investment-grade debt ratings, and
warns about the potential for bankruptcy as it struggles to get
financing. Peek announces plans to retire only one month after
the company renewed his contract for one year.
(Reporting by Juan Lagorio; Editing Bernard Orr)

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN3042988020091101

[robo50]

9. Done deal.........

http://www.thebostonchannel.com/money/21491198/detail.html?treets=bos&tml=bos_natlbreak&ts=T&tmi=bos_natlbreak_1_03460111012009

I wonder who got bonuses at CIT in the last year, and how much those bonuses affected this.

[Joanne98]

10. I wonder how many credit default swaps are outstanding against CIT?

You don't suppose vulture Icahn and giant vampire squid Goldman forced them into bankruptcy so they could hit the jackpot. AGAIN!

[ChiciB1]

11. AGAIN With The Goldman Sachs Crowd!! WHAT? WHAT? WHAT?

I can just hear Dylan Ratigan tomorrow... I haven't heard many shows where he hasn't brought up Tim Geithner's name and his connection with them.

Makes me wonder more and more all the time. How many people who used to work for GS are NOW working at the WH, or FOR the WH??

Then, I sit and wonder some more!!

[boppers]

13. $71 billion in assets and nearly $65 billion in liabilities (according to NYT)

This isn't actual bankruptcy, this is a deal to legally screw bondholders, rather than pay out.

[Yupster]

16. They have something like $ 7 billion

in bonds maturing this week and they don't have the cash to pay them off.

[optimator]

15. taxpayers get to pay interest on the CITI bailout

everyone screamed no more bailouts for failed banks, and now we were all proven right.

Who is the CRIMINAL who declared CITI to be solvent enough to get a bailout?

Anyone remember those phony "stress tests?"
Remember how they kept the results secret?

Someone must be punished.