By: Sara Sindelar
CIT Group, Inc. is “a large American commercial and consumer finance company included in the Fortune 500 and the S&P 500 index. CIT's Commercial Finance business offers secured lending, leasing and factoring products.”
CIT is on the brink of declaring bankruptcy if they do not get bondholders approval for the $29 Billion debt exchange/swap. This is a swap of “unsecured obligations for new secured debt and preferred shares”, in effort to avoid bankruptcy.
There is a prepackage Bankrupt plan where bondholders will “receive 70 cents on the dollar in form of new 7% notes and 83.4 % of equity in reorganization” of the company. CIT has $75 million in assets which contributes to many small and medium sized businesses. CIT is a critical part of the supply chain of the retail industry and will have harsh affects on it if it declares bankruptcy. “A Collapse would ripple the ‘small and medium sized business who rely on the finance company to operate,” speaker from CIT.
It is stated that if CIT goes bankrupt it could be the 5th largest bankruptcy to date. Though, if bondholders approve the swap their $29 million debt could be reduced by 30%. The now CEO, Jeffrey Peek, has declared he will resign at the end of the year and there is a board in place to find his replacement. This bankruptcy could cause a major stir up in the economy and it is up to the bondholders to make the choice of the swap.
http://www.bloomberg.com/apps/news?pid=20601103&sid=adkNpcgSTTeo
http://www.boston.com/business/articles/2009/10/14/chief_of_troubled_cit_plans_to_resign/
http://www.bloomberg.com/apps/news?pid=20601103&sid=agRAQzb5M3cg
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/30/AR2009093004993.html
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