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CIT Files For Bankruptcy

November 1, 2009


The NYT has just announced that CIT Group has lost its battle to stave off bankruptcy. 

On Sunday afternoon, the company filed for Chapter 11 — but under a so-called prepackaged bankruptcy plan that will enable it to emerge from court protection by the end of the year.

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.

No one knows if a financial company can survive a bankruptcy whose existence depends so much on confidence.

Much of the NYT article chronicles the fate of the bondholders.  What is really concerning those of us in the furniture and accessories business is the affect on manufacturers and retailers.  In our case we lost the ability to get credit from a vendor who was backed by CIT.  We then were made to requalify for credit.  Because business has been so bad for most of us, requalification is not a given.

How big is the news of CIT Group?  Consider that CIT is a commercial bank holding company that offers lending, leasing, and advisory services to small and mid-sized businesses and to more than half of the "Fortune" 1000 and serves some one million clients in more than 50 countries around the world.

Taxpayers may lose the $2.5 billion used to help bail out CIT, but Goldman Sachs who bought bankruptcy protection will make about $1 billion.  In the end taxpayers may have to support many more people caught in the financial storm called CIT.

Thoughts?  You can comment directly, email me at landfair3554@comcast.net or follow me @landfairfurnitu.

Posted by Mike Landfair on November 1, 2009 | Comments (0)