Update: CNBC reports that CIT Group is trying to raise up to $3 billion from private investors to avoid a Chapter 11 bankruptcy filing.
Middle-market commercial lender CIT Group (CIT) has been told it won't be getting a government bailout anytime soon, the company said in a statement this evening.
"There is no appreciable likelihood of additional government support being provided over the near term," CIT disclosed in a press release. The lender, which last weekend hired a law firm specializing in corporate bankruptcies, said it's "evaluating alternatives."
CIT has been battling a severe cash shortage and faces a billion-dollar debt payment next month. Unable to sell bonds, it had been lobbying the Federal Deposit Insurance Corporation for approval to participate in a program that guarantees bank debt. Evidently the FDIC turned CIT down.
Analysts at Standard & Poor's warned earlier this week that losing out on further government assistance could doom CIT to bankruptcy.
Groups representing industries in which CIT lends tried to make a case today for additional bailout funds for the company, which already received $2.33 billion under the U.S. Treasury Department's Troubled Asset Relief Program.
The American Apparel and Footwear Association, which represents clothing suppliers, said in a statement that a CIT bankruptcy would have a "crippling impact" on manufacturers.
In a note to clients last week, Kathleen Shanley, an analyst with corporate bond research firm Gimme Credit, said CIT wasn't likely to be seen by regulators as so interconnected that it had to be saved.
"We don't view CIT as meeting the 'too big to fail' test, especially since there is a long list of other troubled banks
awaiting regulatory attention, some with more insured deposits at risk than at CIT," Shanley wrote.
David Hendler, a bond analyst with research firm CreditSights, in a note to clients estimated that CIT's lending supports just 1 percent of U.S. manufacturing and retail businesses.
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