CIT seeks private capital after bailout bid is rejected
Filed under: Company News
Denied a government bailout, foundering middle-market commercial lender CIT Group (CIT) is scrambling to line up as much as $3 billion in capital from private investors in a bid to stave off bankruptcy.It's a race against time. The Wall Street Journal and CNBC, among others, are reporting that CIT has given the investors 24 hours to decide whether to decide if they will plow the needed cash into the company. In the meantime, its condition is worsening as customers draw down credit lines they fear might not be there tomorrow.
But will $3 billion be enough? In a note to clients today, bond analysts at research firm CreditSights estimated CIT may need to raise twice that amount to remain afloat. It faces a billion-dollar debt payment next month and dwindling cash reserves.
For investors in the company's bonds, "the prudent course is to brace for bankruptcy," the CreditSights analysts wrote in a note to clients today.
Last night, CIT announced that "there is no appreciable likelihood of additional government support being provided over the near term" and that talks with the government had ended. The company had sought access to a program run by the Federal Deposit Insurance Corp. that guarantees bank debt.
In a statement, the Treasury Department said, "Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies."
Evidently it was a threshold that CIT, which counts numerous small- and mid-size businesses among its customers, could not cross. The company already received a $2.33 billion investment under the government's Troubled Asset Relief Program, or TARP.
Though CIT's precarious position is worrying for businesses that depend on it for financing, and despite the fact that a bankruptcy filing would make it the largest bank to fail since the collapse last fall of Lehman Brothers and Washington Mutual, GimmeCredit bond analyst Kathleen Shanley said the market isn't signaling that company isn't too big or interconnected to fail.
"While there has been an outcry from CIT customers concerned about access to credit, we note that the equity and corporate bond markets as a whole have been relatively unruffled by the CIT drama," she wrote in a note to clients today.
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Reader Comments (Page 1 of 2)
7-16-2009 @ 7:38PM
teltech54 said...
Well it looks like the government has finally opened its eyes to the real state of the economy. Denying bailout funds to a company that is eventually going bankrupt is a smart move on the governments part. We hope they finally learned that throwing good money after bad is not the way to go.
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7-16-2009 @ 2:15PM
Duke said...
Good. If CIT can't get funding, then they should file bankruptcy. No more bailouts. The taxpayer will never see the $50 billion the government loaned GM. No more bailouts period.
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7-17-2009 @ 1:13AM
mickey said...
Its sickening how much taxpayer dollars have been swallowed by GM. We told the fed not to bail out last December. They gave GM our money. Now we will never get it back, ever. Don't buy a GM, you will just be giving them more ammunition to pretend they are a worthy company. They suck and their cars suck. New GM or Old GM. It doesn't matter. GM is two faced and both faces are ugly.
7-16-2009 @ 2:28PM
SBA borrower said...
Let 'em fail. I owe them $500K and they won't talk about refinancing my package. If they won't help the people who are paying them interest every month, cut 'em loose. I'm refinancing through another lender.
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7-16-2009 @ 2:41PM
Bob said...
One less hog at the trough.
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7-16-2009 @ 5:25PM
rgr said...
perfect
7-16-2009 @ 3:48PM
Dave Johnson said...
I hope C.I.T. gets a bailout. I worked for this company for several years and they always treated their customers and employees fairly. It will be a shame if they go under.
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7-16-2009 @ 3:47PM
rip300rog said...
No more bailouts for these bloated bastard bankers.
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7-16-2009 @ 4:09PM
Henry Hull said...
The United States is facing, for the first time in its existence, the very real possibility of BANKRUPTCY...this is not mere fear mongering but reality....there are those who have interests here and there whose sole purpose is to keep this charade going, but the reality is clear and if you listen to many politicians, as they mutter under their breath you will hear that this is a very real possibility....THE HEALTH CARE REFORM ISSUE IS NOT MERELY FOR YOUR AVERAGE JOE TO HAVE A DOCTOR...IT IS REALLY TO SAVE THE NATION FROM ALMOST CERTAIN DEFAULT BECAUSE WE CANNOT PAY FOR THE MEDICARE COSTS AND THE MEDICAID COSTS THAT ARE PLAGUING OUR SYSTEM. if they fail to overhaul that system, its pretty much beddie bye for our economy and I dont care what anyone says. With the boomers coming, you had better bring costs down now, or else!!!! Today the stock market went up, once again on BOGUS NEWS!!!! I DONT KNOW WHO IS ENGINEERING THIS NEWS THOUGH I CAN GUESS THE REASON, BUT IN REALITY THE TIC FLOWS TODAY TOLD THE WHOLE STORY AND THERE ARE MANY WORLD WIDE WHO UNDERSTAND FULL WELL WHERE THIS IS ALL HEADING.
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7-16-2009 @ 4:42PM
ram6968 said...
oh yeah...run your mouth when you don't know what your talking about.......been listening to RUSH again, huh
7-16-2009 @ 5:55PM
Paulio said...
Ram he really does know what he's talking about. Medicaid reform has been on the table since Clinton. Nothing got done though. One of the biggest factors in the demise of GM is that it was the largest single healthcare provider in the nation. Can other countries afford to let us go bankrupt? I believe that they are finding out that they can. As for the stock market perhaps you have a worthwhile answer as to why IBM's per share profit soared 2.32 per share yet their sales dropped 13%. They aren't milking goods and services as they would have us believe. They are dumping bonds. Please try and stay off the koolaid and stop blaming the people who study everyday reality on Limbaugh. He's like you a sucker.
7-17-2009 @ 3:54PM
Thomas said...
Your RIGHT, and lets not forget the Cap and Trade Tax. It is nothing less than extortion from the Americans or the American tax payer. Bankruptcy is coming, because the Federal Government spending is out of control and when the Federal Government reaches a point of being bankrupt, their going to take all of us with them. The U.S. dollar won't be worth anything. Just think, when our country started back around 1776, the new U.S Government had to borrow money just to get the U.S. Government going and have a credit rating. Now, in just the last a couple of decades, the people wanting CHANGE, have destroyed the country to the point of being bankrupt. I wonder what ALL the people who gave their lifes, and gave ALL THEIR MONEY to the NEW U.S. Government would think today of the people who have bankrupt the same U.S. Government and country with the mind-set of WHAT'S IN IT FOR ME.
7-16-2009 @ 5:01PM
Paul said...
The United States should file bancruptcy and shake off the blood suckers we are paying. We can bring all of our troops home and rebuild by manufacturing our own products and selling our food to the rest of the world. Deflation needs to occur some way some how and it need to happen NOW. I will speak for 300 million Americans who have been trashed by inflation of our dollar and the fleecing by the bankers of the world. We cannot allow ownership of United States lands by foreign owners. We have worked our entire lives to try to get ahead in life only to be smacked down by inflation. Property values were rediculous. Land values outrageous. An acre of good farm land sold for 300-700 an acre in 1970. today you can't touch an acre for less than $5000. a 100ft by 150 ft city lot was not worth much back then either. today it is the biggest part of the property value in many cases. These liar economists say there has been little inflation during that time. Look back at your property taxes 30-40 years ago. that is the true level of inflation.
REVOLUTION, REVOLUTION, REVOLUTION!!!!
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7-16-2009 @ 6:34PM
Larry said...
CIT would not get government funds. Their biggest competition is GE Capital. And, it is GE that contributed so mightily to Obama. Obama has reciprocated with almost $6 trillion in loans. Almost half of Obama's admin is or will be working for GE. GE also owns NBC, CNN, and MSNBC. These stations may not report any negative news about Obama. Gee, I wonder why CIT got no funds from Obama!
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7-16-2009 @ 6:54PM
Ronda said...
I want to know how much taxpayer money is being wasted by these idiots when they print the millions and millions of pages of bills for each idiot.
They are so worried about the enviroment. What is the effect on the enviroment due to the millions and millions of documents these idiots print?
What happens to the paperwork once they are done with the documents relating to a certain project?
Why do we continue to sit back and let them live it up on our dime while we are begging for every little thing?
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7-18-2009 @ 6:17PM
smartcanuc said...
Bankrupt America can only save itself by putting brakes on rolling money to Mid-East. Convert every car to natural gas; manufacture a million tankers to bring liquefied natural gas from Alaska with in a short time. Don’t wait for pipe lines that will take some twenty years. Production process of tankers will use up every ounce of steel and other metals. Steel and metal industry will get busy a billion jobs will be created. Of course this will make fat Sheiks of bankrupt and send them to camel's backs and put a lid on Iran's nuclear ambitions. Israel will love it. Take advise from a smart Canadian
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7-16-2009 @ 7:51PM
octingenti said...
America is no longer a Democratic country...
America has now become a (OMMCRWSE)
"Oil-Market Manipulating, Corrupt, Robbing Wall Street Economist."
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7-16-2009 @ 11:44PM
Sonja said...
Only problem with letting this one fail is they do most of the financing for small and medium size businesses and it's going to be very bad for this country if these businesses can't get financing. Most people are employed by small and medium size businesses, not the big ones. But, they bail out the big guys who give the large contributions to election coffers. This could be a very serious situation for this country.
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7-17-2009 @ 12:37AM
SHUTUPDEMLIARS said...
OBAMA DID YOU GET THE HINT ""CIT"" NEEDS A BAILOUT. SO DO THE AMERICAN PEOPLE STOP SPENDING ASS HOLE IT DOESN'T WORK NEVER HAS NEVER WILL. IF YOU DIG AT THE HOLE IT JUST GETS BIGGER DEMS. LOOK IT UP IF YOU NEED TO MIGHT NOT BE A BAD IDEA FOR MOST OF YOU . THE KEY WORD IS HOLE 4 LETTER WORD JOE BIDEN.
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7-17-2009 @ 7:44AM
Curiousme said...
Is this company owned by Kingdom Holding Company? You know, that company that already owns or has majority interest in such companies as Citibank, eBay, Walmart, Kodak, Newscorp, and others? You know, the one owned by a Saudi Prince, whose father is the King of Saudi Arabia. Owned by one of the richest men in the world? Is it? Just curious. If so, why has any U. S. tax dollar money been funneled down that shute and why is it not being reported?
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