CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

[Sapiens]

http://www.bloomberg.com/apps/news?p...d=aW_ngoMWF.u0

CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

By Tiffany Kary and Lester Pimentel

Nov. 1 (Bloomberg) -- CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy with financing from investor Carl Icahn after the credit crunch dried up its funding and a U.S. bailout failed.

[BigBagel]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

U.S taxpayers are minus 2.3 billion dollars.

[pwcmba]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

http://news.ino.com/headlines/?newsid=689667786797901

CIT files for Chapter 11 bankruptcy protection

By STEPHEN MANNING
AP Business Writer
(AP:WASHINGTON) Lender CIT Group has filed for Chapter 11 bankruptcy protection, in an effort to restructure its debt while trying to keep loans flowing to the 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 have overwhelmingly approved a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.

"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," said Jeffrey M. Peek, chairman and CEO. Peek has said he plans to step down at the end of the year.

CIT's move will wipe out current holders of its common and preferred stock, likely meaning the U.S. government will lose the $2.3 billion it sunk into CIT last year to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.

The Chapter 11 filing is one of the biggest in U.S. corporate history. CIT's bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. Its collapse is the latest in a string of huge cases driven by the financial crisis over the past two years, as bailed out industry heavyweights like General Motors and Chrysler both entered bankruptcy court.

CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.

It received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.

It is unclear what the filing will mean for the nation's small businesses, many of which look to CIT for loans to cover expenses like buying materials at a time when other credit is hard to come by.

Analysts have warned that already ailing sectors, like retailers, could be hit especially hard, since CIT serves as the short-term financier for about 2,000 vendors that supply merchandise to more than 300,000 stores.

[pwcmba]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

And Goldman makes another Billion. Time to increase those bonuses!!!

"CIT Bankruptcy Filed: US Will Likely Lose $2.3 Billion, Goldman Sachs Will Gain $1 Billion"

http://www.huffingtonpost.com/2009/1..._n_341567.html

[metalman]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

U.S taxpayers are minus 2.3 billion dollars.

no one gives a shit until...

a. taxes rise
b. inflation rises

been waiting 20 yrs for either, but we keep on spending and the cretins in china/japan/etc keep on financing it, so...

[thunderdownunder]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

So what are the ramifications?
My view is it is a frightening progression on what we all knew would happen eventually. Why?
This is a very big company with offices all around the World, One Million 'grass root' customers, so I read.
Its principal business is Factoring - providing payments for orders of goods on an immediate basis until it gets repaid with a (small) margin 60-90 days down the track. It will continue to operate this book but it will be frozen until it emerges from bankruptcy. This may make its current customers very exposed to cash shortfalls should inventory restocking be required (think Christmas). Inventories are already low and everyone was hoping that a bounce was around the corner but now there is a pothole in the road of finance. Bad!
It is also in Rail car leasing - Currently 200,000+ are hold up waiting on the sidelines in the US, waiting for use. Not a great time for Leasing businesses.But I have no figures on if it is currently profitable for CIT.
Airplane leasing - Ditto - but probably a loosing proposition in this market. Bad!
Assets - well I would (correctly) assume that everything it has as a Tangible Asset has been pledged to keep it going to date. Intangible assets such as Good-Will etc are uncertain. One thing about going bankrupt you can be sure happens. You go broke slowly as you sell off/pledge unencumbered Assets, then all of a sudden, when there is nothing left in the cupboard.
CIT common shareholders and the US public purse is wiped out on this one.
Secured creditors such as GS, other investment banks and some bond holders expect to get 70-80c in the dollar. I would bet a penny to a pound they will find it hard to recover 40c/ $. GS, however are not silly, they knew this one was dead and as such they will have off laid the risk to another party should it go unexpectedly pear shaped.
Its effect on the Stockmarket would be uncertain as it was always going to occur. However this is NOT small Potatoes and the ramifications are huge and effect a broad base of Businesses at a time when everything is a little fragile and at the time of year that will have the worst effect on them.
A Black swan it is not, but it IS Cygnet. The markets are brittle and nervious - it just takes a twig to break its back.
Monday will tell if there exists a Plunge protection team - They had better have deep pockets;)
These are my views only- not investment advise. Row your own boat -but if it affects me down under it will rattle teeth in the US

[goadam1]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

no one gives a shit until...

a. taxes rise
b. inflation rises

been waiting 20 yrs for either, but we keep on spending and the cretins in china/japan/etc keep on financing it, so...

two billion? Walking around money.

Face it, winning WW2 and the Cold War is worth a whole bunch. Plus, we have client states who are depending on us for protection. Do you think korea and japan are ready to just give China control of the east? Are the Saudis or UAE ready to have a civil war or let the Shia control the Mid-east?

That is the difference between us and Argentina or Russia going ka-poom. I think we should calculate what our military is worth as an export on the balance of payments table.

Think of us as 21st century Hessians.

Meanwhile, I'm gonna go out and make it rain with my cit credit default swaps.

[touchring]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

This is a misconception many Americans still living in the 20th century. Post subprime, Iraq, and Afghanistan, the Japanese are starting to be more wary of their relationship with the Americans than with the Chinese.

http://www.forbes.com/2009/10/29/oki...n-g-chang.html

two billion? Walking around money.

Face it, winning WW2 and the Cold War is worth a whole bunch. Plus, we have client states who are depending on us for protection. Do you think korea and japan are ready to just give China control of the east? Are the Saudis or UAE ready to have a civil war or let the Shia control the Mid-east?

[Verdred]

Re: CIT Group Seeks Bankruptcy Protection After U.S. Bailout Failed

This is a misconception many Americans still living in the 20th century. Post subprime, Iraq, and Afghanistan, the Japanese are starting to be more wary of their relationship with the Americans than with the Chinese.

http://www.forbes.com/2009/10/29/oki...n-g-chang.html

That Liberal Democratic Party victory was pretty amazing. 2000+ years of japanese on-again-off-again relationship with China though is something to behold. Talk about an "Elliot wave super-cycle" (I chose those words randomly I hope they mean something ironic).

The thing culturally about Japan is that I feel it may be one of the keenest at understanding realities of shifting trends (okay, it underestimated in WWII but that was a nutty thing all the way around) . Japan is highly adaptable, its sort of written into the Shinto and Zen Buddhist "tradition": things change, often (I'm generalizing but I feel qualified to make that assertion with confidence).

If they perceive the US weakening, and globalization taking a couple of blows itself, I wouldn't be surprised if japan shifts more nationally and, simultaneously, regionally (of course, this is happening globally as nationalist/regionalist leaning, right and left, parties seem to be winning elections.)

Can Japan get over historical mistrust of China? I don't know, China never nuked them. But I would agree with touchring that countries, particularly one like Japan, might start giving up the security-blankey known as US military as the propaganda of "anti communism" fades and fails to be supplanted by "anti terrorism". Terrorism just can't compete on the fear index the way communism did.

disclaimer: not japanese

[touchring]

Can Japan get over historical mistrust of China? I don't know, China never nuked them. But I would agree with touchring that countries, particularly one like Japan, might start giving up the security-blankey known as US military as the propaganda of "anti communism" fades and fails to be supplanted by "anti terrorism". Terrorism just can't compete on the fear index the way communism did.

Japan won't get over the historical mistrust of China. But in the short to medium term, it is the Japanese economy that matters for the current government.

Today, China call the shots. Japan has seen how the US government is being controlled by the Chinese. With Chinese companies buying over American companies, technology, and jobs transferred to China, it won't be for long (probably less than 10 years) before China becomes a much more important trading partner to Japan than the US. Number wise, China has already overtaken the US last year - http://www.jetro.go.jp/en/news/relea...080229066-news