CIT Bankruptcy Looming
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From Bloomberg, CIT Debt Swap Struggles, Bankruptcy Looms:
CIT Group Inc is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter said.The lender to small and medium-sized businesses said earlier this month it was looking for investors to approve a large debt exchange that would reduce its borrowings, or to approve a prepackaged bankruptcy.CIT has limited time to work out its debt difficulties. It has about $3 billion of debt to repay in the fourth quarter, including both secured and unsecured obligations, according to a CIT quarterly filing with regulators.
The credit crunch for small businesses struggling to survive will be exacerbated by the bankruptcy of CIT Group. As government props to failed businesses are removed, expect bankruptcy filings to rise.
U.S. Taxpayer Takes a Hit
One investor that would take a hit in a CIT bankruptcy is the U.S. government. The United States’ Troubled Asset Relief Program invested $2.3 billion in CIT in December and much or all of that could be lost if the company files for bankruptcy, analysts said.
So much for all the nonsensical talk of U.S. taxpayers making money on government bailouts. We have already sunk hundreds of billions of dollars to “save” veritable black holes like AIG. What brought down financial institutions? Derivatives. Unfortunately, derivative positions are increasing right now, which suggests the real big crisis is still ahead.
More on this topic
(What's this?)
CIT Offers Debt Exchange, Draws Up Bankruptcy Plans
(Money Morning, 10/3/09)
CIT Rescue Shows Credit Isn’t Dead
(Investment U, 7/20/09)
Is CIT Group "Too Big To Fail'?
(Wealth Daily, 7/14/09)
