CIT Group Files for Chapter 11 Bankruptcy Protection
BloombergNovember 1, 2009
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 and debt exchange offer failed.
New York-based CIT listed $71 billion in assets and $64.9 billion in debt in a Chapter 11 filing in U.S. Bankruptcy Court for the Southern District of New York. None of its operating subsidiaries, including CIT Bank, a Utah-based bank, were included in the filing, and operations will proceed as normal, CIT said in a statement.
The bankruptcy “will allow CIT to continue to provide funding to our small business and middle-market customers,” said Chief Executive Officer Jeffrey Peek in a statement.
CIT has $1 billion from Icahn to fund operations while it reorganizes. The credit line, to be drawn on until Dec. 31, will be a so-called debtor-in-possession loan.
The company had asked bondholders to exchange $30 billion in debt for new securities and equity. Icahn made a competing offer. After CIT’s offer expired at midnight on Oct. 29, the company said it was tallying 150,000 ballots.
The company’s debt holders had rejected the exchange offer, with 90 percent of holders who voted opting for the prepackaged bankruptcy plan. The plan will cut $10 billion in debt, and CIT seeks “quick confirmation” of its plan, CIT Group said in a statement.
CIT said it would try to emerge from bankruptcy two months from the date of its filing.
The case is In re CIT Group Inc., 09-16565; U.S. Bankruptcy Court, Southern District of New York (Manhattan.)
Goldman Trims CIT Loan to $2.125 Billion
October 30, 2009* CIT pays $285 million in fees to Goldman
* Counting votes on restructuring plan, debt exchange
* Shares fall almost 12 percent to 84 cents in pre-market
Reuters - Goldman Sachs Group plans to trim the rescue loan it arranged for CIT Group Inc by $875 million to $2.125 billion, CIT said on Friday.
CIT, which has been struggling to finance itself amid the credit crunch and recession, said it is effectively removing the part of the loan it hadn't taken, according to a filing with regulators.
The commercial lender paid $285 million as a fee to Goldman for reducing the loan and it has posted an initial $250 million in collateral, according to the filing. In return, Goldman has agreed it will not terminate the loan should CIT file for bankruptcy.
Goldman had been seeking to amend the loan since earlier this month, according to reports. The bank had been due a payment of $1 billion if CIT filed for bankruptcy, a source told Reuters.
CIT is likely to file for bankruptcy in the coming days, analysts have said.
If struggling U.S. commercial lender CIT Group Inc were to collapse it would be a "drastic mistake" as the small businesses that rely on it would have few alternate sources of funding... "I have a great fear of the collapse of CIT and that people don't understand the ramifications of what that can be. I think it would be a very, very drastic mistake in this country to allow CIT to go under." - Lynn Tilton, chief executive of distressed investment firm Patriarch Partners, CIT Collapse Would Be a Mess, Turnaround Experts Say, October 1, 2009The lender has offered investors two options: an exchange of bonds for new securities and equity, avoiding a bankruptcy filing; approval of a reorganization plan before the company files for bankruptcy.
Separately, in a statement on Friday, CIT said an independent balloting company is counting more than 150,000 ballots from investors on the exchange and restructuring plan, which expired on Thursday.
The company did not say how long this process might take.
CIT shares fell almost 12 percent to 84 cents in pre-market trading.
