I dont know if this is good or bad for this market. They will stay in business I think. But who NOW is going to loan money to the business that CIT did. CIT had a nice business until the CEO just had to go and buy into the greedy and idiotic mortgage backed securities or derivatives or whatever else brought this 100 year old company. These CEO's need to go to jail.
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CIT Group Files for Bankruptcy Protection
GOLDMAN SACHS, CIT, LOAN, BONDS, BONDHOLDERS, BANKRUPTCY, BANKS, BANKING, ICAHN
Reuters
| 01 Nov 2009 | 04:34 PM ET
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CIT Group, a century-old commercial lender, filed for bankruptcy on Sunday, as the global credit crisis left it unable to fund itself and the recession left it with too many bad loans.
CIT's creditors have already approved its reorganization plan. Analysts have said that getting through bankruptcy is crucial for CIT if it wishes to keep its customers, which include Dunkin' Donuts franchisees and film production company Dark Castle Entertainment.
CIT's operating subsidiaries, including CIT Bank, are not included in the bankruptcy filing, and expect to continue operating, the company said in a statement.
“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. He added that the measure was aimed at a "swift emergence" from bankruptcy protection.
CIT, which filed for bankruptcy protection in the Southern District of New York, plans to reduce its total debt by about $10 billion. The company had about $65 billion in liabilities as of mid-June and $800 million of debt is coming due next week.
Under the bankruptcy plan approved by bondholders, creditors will end up owning the company. Most bondholders will also end up with new CIT debt worth about 70 percent of the face value of their old debt. Preferred shareholders, including the U.S. government, will get money only after other creditors are paid back. Current common shareholders will receive nothing.
The U.S. government invested $2.33 billion in CIT preferred shares in December 2008 through the Troubled Asset Relief Program.
CIT financed itself mainly by borrowing from bond markets, which has proven to be a flawed strategy as the credit crunch that began in 2007 has made it much more expensive for troubled companies to fund themselves.
The pre-packaged bankruptcy was widely expected after billionaire investor Carl Icahn last week threw his support behind a bankruptcy filing.
Icahn, who says he is CIT's largest bondholder, said in a statement that he changed his mind on the pre-packaged bankruptcy plan because he was pleased by changes the company made, including establishing an accelerated process for appointing new directors.
On Friday, shares of cash-strapped CIT slumped 24 percent to 72 cents as investors took the announcement as an indication that the pre-packaged bankruptcy plan would go ahead.
Also Friday, CIT said it had reached an agreement with Goldman Sachs Group that would reduce a $3 billion credit line to $2.125 billion but, critically, keep the line open during a bankruptcy.