CIT Group

CIT Group, Inc. is a global commercial finance company that provides a comprehensive set of financial products and advisory services to the middle market, founded in 1908. The company has 200+ offices in 50+ countries. CIT is included in the Fortune 500 and is a leading participant in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending. The company does business with more than 80% of the Fortune 1000, and lends to a million small and medium businesses.^[3] It was a part of the S&P 500 Index, was replaced by Red Hat at the close of trading July 24, 2009.^[4]

The company has its headquarters in New York City, and employs more than 7,300 people in locations throughout North America, Europe, Latin America, and Asia Pacific. The company's name is an abbreviation of an early corporate name, Commercial Investment Trust.

In 2008, CIT Group became a bank holding company in order to qualify for, and ultimately receive, $2.3 billion in Troubled Asset Relief Program (TARP) funds.^[11] It declared Chapter 11 bankruptcy on November 1, 2009, and with the consent of its bondholders proposed to quickly emerge from bankruptcy court proceedings.

On July 1, 2008, CIT Group announced that it would be selling its home lending division to Lone Star Funds for $1.5 billion in cash in addition to the $4.4 billion in debt the company held. CIT said it would concentrate on its commercial pursuits due to the decline in housing and mortgage markets of the past year. CIT also planned to sell their manufactured housing portfolio Vanderbilt Mortgage and Finance Inc. for approximately $300 million, although it held a value of $470 million.^[10]

On July 13, 2009, Bloomberg TV reported that CIT was asking for FDIC loan guarantees.

On July 15, 2009 the common stock of CIT was halted on the NYSE during trading hours with "News Pending". At 6:03 p.m. a press release was issued on the company's website stating that talks of a government bailout were unlikely. The company had been advised that there was "no appreciable likelihood of additional government support being provided over the near term."^[12] CIT announced that it believed it was unlikely that it would receive further funding from the federal government, and CIT Group came very close to declaring bankruptcy.^[13][14][15] It was rescued in a US$3 billion deal on 19 July 2009, via an agreement with the bondholders group, which included Pacific Investment Management Company (PIMCO) and some other top CIT holders.^[16] CIT said it planned a comprehensive restructuring of its liabilities.^[17]

On September 30, 2009, in its continuing struggle to avoid bankruptcy, CIT Group was reported to be in negotiations with Citigroup Inc., Barclays Capital, and its bondholders to secure rescue financing to comply with its filing to find a plan “acceptable” to the majority of a bondholder steering committee that provided it with the emergency cash by Oct. 1.^[18]

On Sunday, November 1, 2009, CIT Group filed for Chapter 11 bankruptcy protection.^[19][20][21] It filed in the United States Bankruptcy Court for the Southern District of New York along with CIT Group Funding Company of Delaware LLC.^[22]

On December 10, 2009, CIT satisfied all of the conditions required to consummate the prepackaged Plan of Reorganization (the "Plan"). The distribution of CIT's new debt and equity securities took place in accordance with the Company's confirmed Plan and the new common stock commenced trading on the New York Stock Exchange (NYSE) under the symbol "CIT." All previously issued and outstanding common stock and preferred stock was cancelled.^[23]

Turnaround at Thain's CIT hinges on Fed OK

By Aaron Elstein
October 6, 2010

It's early yet, but we just might have the beginnings of a nice turnaround story at CIT Group, the lender to small and midsized businesses that sank into bankruptcy last year.

On Tuesday, the company announced plans to redeem $860 million in debt that carried a hefty interest rate of 10.25%. It was the second time in two weeks that the company said it would reduce the high-cost debt lingering from its bankruptcy and would help further Chief Executive John Thain's goal to lower the company's cost of capital.

Ok, enough about the numbers. The much more interesting story concerns Mr. Thain, who, you may recall, last year left Merrill Lynch after he was ousted by Bank of America, which then leaked damaging news that he had a small fortune spent to renovate his office. Mr. Thain, who spent 24 years at Goldman Sachs and rose to president of the firm, came to Merrill in late 2007 with a reputation as a fix-it sort of guy after helping modernize the New York Stock Exchange. It didn't work out with Merrill, but if he can turn around CIT, he'll restore his reputation and then some.

He's got quite a bit of hard work ahead of him. The previous CEO--another career Wall Street guy named Jeffrey Peek--left behind a mess. The big problem: CIT, like a lot of Wall Street firms that didn't survive in 2008, funded itself using ultra-short-term loans. When CIT got cut off from that market, its fate was sealed. Mr. Thain's challenge is to create a more stable funding base for CIT by building up a base of deposits it can lend out.

The best way to get those deposits would to buy them by acquiring another bank. Deal-making is in Mr. Thain's bones from his days at Goldman and the NYSE, whose transformation he kick-started just a year after joining by acquiring electronic stock exchange Archipelago in 2005. And there sure are a lot of troubled banks just looking to be bought out nowadays.

Trouble is, CIT's hands are tied.

In August 2009, two months before it filed for bankruptcy, the Federal Reserve Bank of New York identified problems with CIT's credit risk management practices and accounting. That's a big problem, considering the Fed would have to approve any acquisition CIT, and the "agreement" between the New York Fed and the company is still in effect. CIT said in its latest quarterly filing that it continues "to work with our regulators in a constructive manner" to resolve its problems. That must be fun.

In other words, there's only so much that Mr. Thain can make happen at CIT until the Fed says it can happen. There aren't many starker examples of how power has shifted on Wall Street than this one.

CIT Group Names Ex-Merrill CEO and Former Sachs COO Thain as Chairman, CEO

Associated Press
February 7, 2010

Former Merrill Lynch CEO John Thain, who brokered the investment bank's controversial sale to Bank of America, is taking over as chairman and CEO of CIT Group as the commercial lender continues to restructure its business following a brief stay in bankruptcy protection last year.

CIT Group Inc., one of the nation's largest lenders to small and mid-sized businesses, said Thain will take the helm immediately. The 54-year-old replaces acting interim CEO Peter J. Tobin, who will remain on CIT's board. Tobin had stepped in while CIT searched for a permanent replacement for Jeffrey Peek, who retired as chairman and CEO on Jan. 15.

As chairman and CEO of Merrill Lynch, Thain's deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

Thain resigned as head of global wealth management at the combined company shortly after the deal was completed and later repaid the bank for the renovations. He has defended the acquisition, saying Merrill was transparent with Bank of America about the company's losses and bonuses before the purchase closed. New York Attorney General Andrew Cuomo's office filed civil charges last week against Bank of America, its former CEO Ken Lewis and former Chief Financial Officer Joe Price, saying they misled investors about the Merrill Lynch deal.

Prior to Merrill, Thain served as CEO of the New York Stock Exchange and president and chief operating officer of Goldman Sachs. A CIT spokesman said Thain's role at the NYSE, where he modernized the exchange and better positioned it to compete in the global marketplace, was one of the accomplishments that most impressed CIT's board.

"John is a well respected financial services executive and proven leader who is uniquely qualified to lead CIT at this critical stage," said CIT lead director John Ryan in a statement. "We have the utmost confidence in John and are pleased to welcome him to CIT."

Jeff Aronson, co-founder and managing principal of CIT investor Centerbridge Partners, said his firm fully supports CIT's decision.

Thain's appointment brings stability to the top ranks of a company which has seen a series of management departures since it emerged Dec. 10 from a quick stay in bankruptcy court.

President and Chief Operating Officer Alexander T. Mason, 58, is leaving the company Feb. 26. Chief Financial Officer Joseph Leone has said he plans to retire in April. CIT Group also last month announced the resignation of two directors and the appointment of three outsiders as it completed a shift to a more independent board to guide its restructuring effort.

CIT Group, which lends to more than 3,000 businesses including supermarkets and department stores, was forced into bankruptcy after failing to raise cash to pay off outstanding debt. The more than 100-year-old company also was hammered by mounting loan losses as more customers fell behind on repaying loans during the recession.

Common stock holders and the government lost their investments when CIT filed for bankruptcy protection. The Treasury Department had given CIT $2.3 billion in loans as part of its $700 billion financial bailout plan.

The company moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan. It was able to cut its total debt by $10.5 billion and deferred debt maturities for three years. The same month it emerged from Chapter 11 it made plans to start lending again, committing to fund $500 million in new government-guaranteed loans to small business customers in 2010.

CIT Group declined to disclose details of Thain's compensation package.

Thain inherits a company that in addition to its lending activities is the third-largest railcar leasing firm in the U.S. and the third-largest in airline financing globally, according to its Web site.

"Much has been accomplished in recent months to position CIT for renewed success," Thain said in a statement. "We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs."

CIT Names Board Member to Interim CEO

International Business Times
January 20, 2010

Commercial lender CIT Group Inc (CIT.N) on Tuesday named longtime director Peter Tobin as acting chief executive as the company's board looks for a permanent successor to Jeffrey Peek, who retired as chairman and CEO on Friday.

Tobin, 64, will continue to serve as a director while the board seeks to fill the CEO post as quickly as possible, CIT said in a statement.

The lender, which recently emerged from bankruptcy, was said by sources familiar with the matter to be courting former Merrill Lynch & Co (MERDL.PK) Chief Executive John Thain for its top job.

A deal to hire Thain could also include Nelson Chai, who worked with Thain at Merrill and also NYSE Euronext (NYX.N), one of the sources said last week.

Thain resigned under pressure from Bank of America last January, a few weeks after the Charlotte, North Carolina-based bank bought Merrill. He told Reuters last year he was looking for a job in private equity or with a public company.

A CIT spokesman had no comment on Tuesday on whether Thain was still in the running, or if the company had identified a preferred candidate.

Peter J. Tobin:

Mr. Tobin served as special assistant to the President of St. John's University from September 2003 until his retirement on May 31, 2005. Previously, he was Dean of the Peter J. Tobin College of Business at St. John's University from August 1998 to September 2003.

From March 1996 to December 1997, Mr. Tobin was Chief Financial Officer of The Chase Manhattan Corporation. From January 1992 to March 1996, he served as Chief Financial Officer of Chemical Banking Corporation, a predecessor of The Chase Manhattan Corporation, and prior to that he served in a number of executive positions at Manufacturers Hanover Corporation, a predecessor of Chemical Banking Corporation.

Mr. Tobin is a director of AXA Financial (formerly The Equitable Companies Incorporated), Alliance Capital Management, L.P., a subsidiary of AXA Financial that manages mutual funds, PA Consulting Group and H.W. Wilson, a publishing company.

Mr. Tobin has been a CIT director since July 2002.

CIT Appoints Former Merrill Lynch & JPMorgan Chase Executive as Interim CEO

New York Times
January 19, 2010

The CIT Group, the small to mid-market lender, said late Tuesday that it has appointed a director, Peter J. Tobin, as its interim chief executive as it looks for a permanent new leader.

Mr. Tobin, 64, will replace Jeffrey M. Peek, who left the firm on Friday. CIT is currently interviewing a number of candidates for its next chief executive; among them, according to news reports, is John A. Thain, the former chief executive of Merrill Lynch.

He has been a CIT director since 2002, and previously served on the firm’s board from 1984 to 2001. During his time on CIT’s board, he had at points chaired its audit committee and risk management committee and served as lead director.

Mr. Tobin, spent most of his career at Chase Manhattan (now JPMorgan Chase), including as chief financial officer of Chase and predecessor Chemical Banking Corporation.

From 1998 until 2005, he also worked in various roles at St. John’s University, including dean of the Peter J. Tobin College of Business and special assistant in corporate relations and development to the school’s president.

CIT in Talks to Hire Thain, Former No.2 Man at Goldman Sachs, as CEO, Says Sources

Reuters
January 12, 2010

CIT Group Inc (CIT.N), a commercial lender that recently emerged from bankruptcy, has talked to former Merrill Lynch & Co Inc Chief Executive John Thain about him taking the company's reins, according to two people familiar with the matter.

A deal to hire Thain could also include Nelson Chai, who worked with Thain at Merrill and also NYSE Euronext (NYX.N), one of the people said.

Thain would follow another former Merrill Lynch executive, Jeff Peek, who retires as CIT's CEO on Jan. 15.

The search for a replacement for Peek is progressing, a CIT spokesman said. He declined to comment on the report, citing a company policy not to comment on market rumor or speculation.

A spokesman for Thain also declined comment.

Thain was fired from Bank of America last January, a few weeks after the Charlotte, North Carolina-based bank bought Merrill. He told Reuters in November he was looking for a job in private equity or with a public company. The MIT and Harvard-educated executive joined Merrill at the end of 2007 from the New York Stock Exchange. Before heading to the NYSE, Thain spent nearly a quarter century at Goldman Sachs Group Inc (GS.N), where he became No. 2.

COMEBACK

CIT is looking to reestablish itself as a lender to small and medium-sized businesses after a disastrous foray into subprime lending earlier this decade.

The lender filed one of the five largest bankruptcies in U.S. history on Nov. 1 after a debt exchange offer failed. One of the biggest financial sector victims of the credit crisis, in December CIT became the only major company in the sector to emerge from bankruptcy.

CIT is looking to move some of its best businesses, including vendor financing and factoring, to its bank, where it can fund them with deposits.

Any new chief executive will need to work hard and negotiate with regulators to put this plan into effect, one person familiar with the business said.

Separately, the company named three new directors on Tuesday, completing a planned reshuffle of its board.

CIT shares closed down 21 cents, less than 1 percent, at $33.55.