Posted on 11/01/2009 1:59:46 PM PST by Chet 99
Update | 3:46 p.m. Three months ago, the CIT Group barely averted what it considered to be a ruinous bankruptcy filing that would likely have put the 101-year-old lender out of business.
On Sunday afternoon, the company filed for Chapter 11 — but under a so-called prepackaged bankruptcy plan that will enable it to emerge from court protection by the end of the year, under the control of its debtholders. (Read the filing after the jump.)
The filing, made in a Manhattan federal court, will still mean much pain for many parties, beginning with taxpayers. CIT received $2.3 billion in government aid last year, a bailout that came in the form of preferred stock. That will almost certainly be wiped out in the bankruptcy process, the first realized loss in the government’s rescue of the financial system.
(Excerpt) Read more at dealbook.blogs.nytimes.com ...
no idea, but CIT has been in death throes for weeks now.
“At least CIT can escape the clutches of Obama now”
entering the government structure known as “bankruptcy protection from forced liquidation by the people who own the company” accomplishes the exact opposite.
Yes, big SARC.
BoA is chomping at the bit to repay TARP, they have been waiting for the government to allow them to repay it for some time - Investment bankers who have spoken to BofA told The Post they are bracing for the bank to pay back some $20 billion. The Charlotte, NC-based bank received the money from the government's Troubled Asset Relief Program to help complete its shotgun merger with Merrill Lynch last December. Rumblings about the bank paying back TARP have been floating around for weeks, but are coming to a head as financial institutions prepare to hand out year-end bonuses. BofA's outgoing CEO Ken Lewis has chafed under the government's thumb. The bank wants to pay its employees freely without government scrutiny, one source noted. "We remain ready, willing and able to pay back TARP and we're only awaiting word from the government on when we can do that," a BofA spokesman told The Post. .....
BofA prepares for TARP payoff - NYP, 2009 October 31, by Kaja Whitehouse :Bank of America is pushing to break free from Uncle Sam's oversight, after borrowing some $45 billion in taxpayer money during the credit crisis.
Quite different from the picture that's regularly being painted. Now, Citigroup is in a bad bind, but that's quite a different story - CIT Group has absolutely no relationship with Citigroup.
CIT's prepackaged bankruptcy filing has been expected for days, if not weeks, the only question was how much the bondholders, particularly Carl Icahn, are going to get and on what terms. Hardly panic-worthy:
Icahn ends CIT battle - NYP, 2009 October 31, by Josh Kosman: CIT reached a deal with the activist investor that should allow it to file for bankruptcy on its terms, and emerge from bankruptcy in about 45 days. Icahn earlier this week waged a campaign to convince other CIT bondholders to vote against a company-proposed debt exchange and a pre-packaged bankruptcy plan. He argued that CIT's board needed to be ousted, and that paying off bondholders should be a high priority. A source close to CIT told The Post several days ago that Icahn really wanted "to get cut in on the financing." After a very public war, billionaire Carl Icahn has negotiated a truce with struggling lender CIT.
Timeline of preparation for filing, in reverse :
CIT Board of Directors Approves Proceeding with Prepackaged Plan of Reorganization with Overwhelming Support of Debtholders - November 01, 2009 15:39ET CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company’s debt and streamline its capital structure. Importantly, none of CIT’s operating subsidiaries, including CIT Bank, a Utah state bank, will be included in the filings. As a result, all operating entities are expected to continue normal operations during the pendency of the cases. .....
CIT Enters into Restructuring Plan Support Agreement with Carl Icahn and Obtains Incremental $1 Billion Committed Line of Credit from Icahn Capital LP - October 30, 2009 13:18ET CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that it has entered into an agreement with Carl Icahn to support its restructuring plan and secured an incremental $1 billion committed line of credit from Icahn Capital LP to provide supplemental liquidity for CIT as it pursues that plan. This new line of credit may be drawn by the Company on or prior to December 31, 2009, subject to definitive documentation and other customary conditions, and may be drawn as debtor-in-possession financing in the event of bankruptcy. Together with CIT’s $4.5 billion expansion facility, announced on October 28, 2009, and other available sources of liquidity, the line of credit will further enhance CIT’s liquidity during the execution of its restructuring plan and ensure its ability to serve its existing small business and middle market customers.
CIT Obtains Additional $4.5 Billion in Financing Through Expansion of Existing Secured Credit Facility - October 28, 2009 13:12ET CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that it has expanded its current $3 billion senior secured credit facility by an additional $4.5 billion. The new $4.5 billion tranche, which is being provided by a diverse group of lenders, including many of the Company’s bondholders, will be secured by substantially the same assets as the existing $3 billion tranche and any additional collateral that becomes available as a result of the Company’s refinancing of certain existing secured credit facilities. ..... The new $4.5 billion tranche matures in January 2012, and includes an option for the Company to extend all or a portion of the new tranche for an additional year.....
If there is a sell-off in the markets tomorrow, it should in no way be in response to CIT Group's bankruptcy restructuring which has been telegraphed for weeks. I wish GM and Chrysler did similar thing before President Bush used TARP funds to bail out UAW and give unions and government a huge stake in auto companies.
No doubt a selloff in the market will be due to both fundamental and technical reasons of the general market and the international market which sold off again.
If the loan to a small business is a good investment, why won’t the money be there?
There simply is not much money to loan. Because of the massive losses of so many banking institutions, they have raised the amount of cash reserves (in some cases mandated by the feds) they hold. Credit requirements have been tightened so much that traditionally credit worthy firms no longer qualify.
The only real money loaned currently is federal, and there isn't nearly enough of it around.
I think he speaks of raising rates on people who pay on time, etc.
And cap and trade.
CC companies charge high rates --- 27% you mentioned ONLY the risky customers, namely, those that have failed to pay on time.
"Due a youtube search and a google search to see what’s going on."
People whose knowledge is derived only from Internet searches should not be laughing at other people. Open a book on finance --- any book --- before you continue to spew nonsense:
"The calculations you present are only relevant for poorly managed financial companies...CC companies can’t pick deselect risky credit card users. They can do this. But they haven’t, so now they are punishing good customers by raising rates to ridiculous rates...not 7,9, 11,,,,not even 14 but 27%."
You know, that these statements are silly you could've learned even on the Internet. Apparently, even that you refuse to do thoroughly.
I've got nothing more to add. Have a good day.
Open a book on Finance for that simple and irrelevant calculation that you did?
Funny.
An appeal to nebulous authority! ;o)
FYI on C from the recent financial article in the Times:
“As a result, the government has handed Citigroup $45 billion under the Troubled Asset Relief Program over the last year. Through the Federal Deposit Insurance Corporation, a major bank regulator, the government has also agreed to back roughly $300 billion in soured assets that sit on Citigroup’s books. Even as other troubled institutions recently curtailed their use of another F.D.I.C. program that backs new debt issued by banks, Citigroup has continued to tap the arrangement.
Citigroup is also one of only two TARP recipients so desperate for capital that they’ve swapped government-issued shares into common stock, diluting existing shareholders. (GMAC, the troubled auto lender that may receive another government infusion, is the other.) “
Of course not. I am sorry to see you read my post so carelessly.
I stated quite clearly that the calculation was easy and did not mention any book in that context. If you made that calculation at least once in your life, then that alone, even without reading, would preclude some of the silly things in your post.
I suggested that you may want to read something on the subject before arriving at conclusions and making claims. At the present time, almost every statement you make is unamnbiguously wrong and simply screams that you have not a clue about matters on which you pass judgment.
Have a good day.
Fairly condescending considering you have absolutely no clue about what you are talking about.
My guess is numbers cruncher at a bank.
Your calculation is sophomoric. It attempts to rationalize 40% interest rates due to the banks making poor judgements on credit risk customers. The reality is that they should be out of business, excepting the taxpayers bailing them out.
The ONLY way to get real job growth is to reduce tax on small businesses.
That just goes to show ya, 'a dollar dosen't go as far these days as it used to'
It just makes me fell all warm and fuzzy to know the same group might be in charge of the nations health care. I bet you feel the same.
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