The CIT Group, a major small business lender, files for bankruptcy

[marmar]

CIT files for bankruptcy protection after rescues fail
Lender lost access to financing when crisis felled shadow banking system

By Alistair Barr, MarketWatch


SAN FRANCISCO (MarketWatch) -- CIT Group Inc., in one of the biggest corporate bankruptcies ever, filed for Chapter 11 protection in New York on Sunday.

CIT, a major lender to small and midsize businesses, has struggled to avoid collapse since the recession triggered billions of dollars in loan losses and the financial crisis cut the company off from its main source of financing.

"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," Chairman and CEO Jeffrey M. Peek said in a statement.

With roughly $60 billion in assets, CIT's filing is probably the fourth-largest bankruptcy in U.S. history, ranking between General Motors and Enron. The bankruptcy of Lehman Brothers, which collapsed last year, was the biggest.

CIT asked the U.S. government for a bailout earlier this year, but despite the company's large business-lending operations, it wasn't deemed too big to fail. See story on government rejecting CIT. ............(more)

The complete piece is at: http://www.marketwatch.com/story/citto-file-for-bankruptcy-after-rescues-fail-2009-11-01

[AllentownJake]

1. Boom!

Commercial Real Estate crisis begins.

[BeFree]

2. Yep

Not to mention the millions of jobs that will end along with the closings of all the storefronts.

Hopefully the gov will begin a jobs program in the near term or the whole economy may collapse.

[AllentownJake]

3. They took their eye off the ball with Health Care reform

and they have a very limited time frame to put their eye back on the ball.

[BeFree]

4. Certainly

While not begrudging HCR, they can chew and walk, one would think.

Seems to me that putting folks to work making alternative fuels would be a double whammy. Jobs here and less money going overseas.

Cleaning up pollution is another win/win.

Any other ideas, Jake?

[AllentownJake]

5. They need to invest in the next generation of manufacturing

They've done some projects, but they were a relatively minor component of the stimulus bill overall.

Best idea they could do is spend 100 billion dollars on investing in battery technology research and send any kid with any skill in math to school for free to get an egineering degree.

More of the products we enjoy are the result of government research turned over to the private sector than people know.

Invent the technology and license the patent on the condition that the patented good and any offshoots in technological development is manufactured in the US for 15 years.

[BeFree]

8. Wellstone

Saw him on the boob tube one day. He was saying that he was going to introduce a bill that would take away gov contracts from corps that banked overseas.

Next time I heard about him he was dead. Go figure.

We've let too many jobs go overseas chasing cheap labor without bennies and without environmental regs. Chickens are coming home to roost and fox guards the house.

Too, did you know the way houses were built just 50 years ago are now illegal to build that way today? (on piers)

This country needs a revolution in the way we do things and we need it fast.

[AllentownJake]

6. 100 billion on rail

wouldn't be a bad investment either.

[BeFree]

11. High speed commuter or boxcars?

Methinks back to the land may be a good investment. With good transportation and disbursed manufacturing houses would need to be built, tools made and all the other human needs accounted for.

[AllentownJake]

12. Both

Get those people out of the trucks an onto working on the rail.

Move the trucking industry to more regional deliveries, less hauling thing across the country.

My cousin has worked on the railways for over 30 years repairing track.

[BeFree]

16. Cousin

RR retirement $'s are heavy, eh?

Ya know, we could use many new small cities. The infrastructure for 100 small cities would be a great jobs program.

Then too, we'd relieve some of the pressure on big cities infrastructure problems.

I say we line up the pubbies put 'em on trains, move them to the country and make them work for a living. JK.

[ProSense]

7. A little overly dramatic maybe?

CIT files for Chapter 11 bankruptcy protection

By STEPHEN MANNING, AP Business Writer

WASHINGTON – After struggling for months to avert bankruptcy, lender CIT Group has filed for Chapter 11 protection in an attempt to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses.

CIT made the filing in New York bankruptcy court Sunday, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders overwhelmingly opted for a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.

The Chapter 11 filing is one of the biggest in U.S. corporate history, following Lehman Brothers, Washington Mutual, WorldCom and General Motors. CIT's bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion.

A prepackaged bankruptcy, which has the support of major bondholders, speeds up the process of restructuring CIT's debt and could allow it to exit court protection by the end of the year. In addition to reducing its debt, CIT said the plan cuts cash needs over the next three years, which should help it return to profitability more quickly.

more

Wasn't this completely expected?

[HughMoran]

9. Some are hoping and praying for disaster

Nothing would make them happier than to have a huge 2nd crisis.

[BeFree]

13. Happier?

Nah. But is it gonna happen? That's the question.

Do you think it's not gonna happen... that we're gonna pull through and carry on as we were?

[HughMoran]

20. Not sure - I've said it was going to happen but am hoping it doesn't. I read about CIT

on Friday and how they were lining up creditors, but would likely still go the bankruptcy route (and announce today.) The commercial real-estate issue has been a topic of discussion for quite some time now and I was hoping that some work was being done in the background to try to head it off. I know my family can't take another hit which we might not be able to recover from, so I see no good coming from another shot to the gut.

[AllentownJake]

22. Sorry if I seem to be celebrating

However, I don't think we are getting out of this till the administration and congress takes some bolder action and the only thing that is going to get them to do that is to wake up to the fact this problem is bigger than they intially estimated.

[HughMoran]

23. Sure, I'd be happy with enough of a crisis to prompt good strong action from the admin.

...but not so bad as to create a crisis of confidence in our leadership. "I told you so" is only satisfying if something good comes from it.

[AllentownJake]

24. The leadership in this country has a choice in the next few months

They can suck it up and realize that the free market is not going to fix itself or they can act like Herbert Hoover acted and put their faith in the market to fix itself.

They are doing an odd dance of half Hoover, half FDR right now that is simply mind boggling.

[AllentownJake]

14. Hoping

Not really, recognizing reality is not hoping.

Wish we could get some less Hope and some more Yes We Can from the administration.

[AllentownJake]

10. So was Lehman Brothers and AIG

What is your point?

[ProSense]

15. Lehman was nearly $150 billion in the red and bleeding

CIT is still in the black by about $6 billion and still able to get credit.

[AllentownJake]

17. CIT touches more entities than Lehman did

Do you know what the factoring business is?

[AllentownJake]

19. BTW

There were 9 bank failures over the weekend with a 2.5 billion dollar loss with the government shopping for a buyer of the banks other branches.

Oh and Citi Bank is about to go down.

[ProSense]

18. More facts

While several firms that have received bailout money, including Goldman Sachs and Morgan Stanley, have repaid the government, others — including the American International Group, General Motors and Chrysler — are expected to lead to losses.

CIT’s filing will test whether a financial company can survive the Chapter 11 process. Bankruptcy has long been considered a death knell for lenders, whose very existence depends on the confidence of its creditors and customers. The company’s struggles have been watched with interest and trepidation by analysts and the thousands of small and mid-sized businesses that borrow from CIT.

CIT was the nation’s largest provide of what is known as factoring, a type of lending used heavily by retailers. The company has spent months trying to reassure its clients that it will remain open for business as stores ramp up for the holiday season. Relatively few other companies serve as factors, and among them are other embattled lenders like GMAC.

Sunday’s filing caps months of efforts by CIT to stay alive. After being denied another bailout by the federal government, the company bargained with its creditors over a restructuring plan that would keep it operating and cut $10 billion in unsecured debt.

“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” Jeffrey M. Peek, CIT’s outgoing chairman and chief executive, said in a statement. “This market-based solution allows CIT to enter into the reorganization process well-prepared and positioned for a swift emergence.”

While CIT had hoped to stay out of bankruptcy court through a bond exchange offer, that plan failed to win enough support from bondholders, the company said in a statement.

With $71 billion in assets and nearly $65 billion in liabilities, CIT is among the largest corporate bankruptcies on record, though it is dwarfed by the likes of Lehman Brothers and Washington Mutual. The company said in its bankruptcy petition that it had $800 million in bonds maturing from Sunday through Tuesday.

CIT said that only its holding company will file for bankruptcy, and that most of its important operating subsidiaries, including its Utah bank, will continue to operate normally.

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[Name removed]

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[mdmc]

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