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Via FT Alphaville.
Goldman to gain $1bn if CIT fails
Posted by Gwen Robinson on Oct 05 05:01.
Goldman Sachs stands to receive $1bn – and US taxpayers lose $2.3bn - if the embattled US commercial lender CIT files for Chapter 11 bankruptcy protection. The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT in June 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares. The agreement states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount”. See more detail here.
Comments:
Brick Oct 5 08:45
Maybe but since a group of CIT noteholders asked a federal judge to annul a claim on CIT Group Inc assets by Barclays Bank and others on the premise that CIT Group knew it would become insolvent as a result of the rescue loan. (ACP Master Ltd et al v CIT Group Funding Co of Delaware LLC).
Goldman is not specifically mention in this case, but the terms of Goldman's loan prohibitted them from using mortgages as collateral which could be construed as forcing CIT into dire straights. This could leave Goldman as next in line for litigation.
We should also note that previous financing by Goldman to CIT means they may get stuck with a load of airplane leases which may not be worth as much as they were.
The question is, if CIT knew they were likely to get into severe difficulties, what was the regulator doing, and since CIT difficulties appear to stem from before the downturn, what was the FED doing lending them money in the first place. I expect both Barclays and Goldman to loose out with the result that neither will be lending to the likes of CIT again.
User3295354 Oct 5 08:32
Will CIT really use Chapter 11? It is very risky for USA and rest of world economy!
If they have to, may be we are again in eve of an other government support... Aren`t we?
Let`s wait and see
Just a little speculation
Ecclesiastes Oct 5 07:16
Would that make it a cadaver-guzzling vampire squid?
Posted by Gwen Robinson on Oct 05 05:01.
Goldman Sachs stands to receive $1bn – and US taxpayers lose $2.3bn - if the embattled US commercial lender CIT files for Chapter 11 bankruptcy protection. The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT in June 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares. The agreement states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount”. See more detail here.
Comments:
Brick Oct 5 08:45
Maybe but since a group of CIT noteholders asked a federal judge to annul a claim on CIT Group Inc assets by Barclays Bank and others on the premise that CIT Group knew it would become insolvent as a result of the rescue loan. (ACP Master Ltd et al v CIT Group Funding Co of Delaware LLC).
Goldman is not specifically mention in this case, but the terms of Goldman's loan prohibitted them from using mortgages as collateral which could be construed as forcing CIT into dire straights. This could leave Goldman as next in line for litigation.
We should also note that previous financing by Goldman to CIT means they may get stuck with a load of airplane leases which may not be worth as much as they were.
The question is, if CIT knew they were likely to get into severe difficulties, what was the regulator doing, and since CIT difficulties appear to stem from before the downturn, what was the FED doing lending them money in the first place. I expect both Barclays and Goldman to loose out with the result that neither will be lending to the likes of CIT again.
User3295354 Oct 5 08:32
Will CIT really use Chapter 11? It is very risky for USA and rest of world economy!
If they have to, may be we are again in eve of an other government support... Aren`t we?
Let`s wait and see
Just a little speculation
Ecclesiastes Oct 5 07:16
Would that make it a cadaver-guzzling vampire squid?