July 20, 2009 7:10 AM
- Text
CIT Group Scrambling to Avoid Bankruptcy
(AP)
Commercial lender CIT Group Inc.'s board is meeting Sunday night to discuss options that would allow the lender to small and midsize businesses to avoid bankruptcy, according to a person briefed on the talks.
The Wall Street Journal and Reuters reported that the company was nearing a deal with bondholders for $3 billion in emergency funding.
New York-based CIT has been negotiating with key bondholders - including bond manager Pimco - in an attempt to avoid a bankruptcy filing. Jeffrey Peek, the company's chairman and chief executive, was actively involved in the talks, according to the person, who spoke on condition of anonymity because the talks are confidential.
CIT has been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company. Rescue talks with government regulators broke off late Wednesday after days of round-the-clock negotiations.
The lender faces $7.4 billion in debt due in the first quarter of next year. Highlighting its woes, CIT was removed from the Standard & Poor's 500 index Friday and replaced with software distributor Red Hat Inc.
CIT, which got $2.3 billion of bailout money in December, had warned that depriving it of more federal aid could imperil about a million corporate borrowers - from Dunkin' Donuts franchisees to retailer Dillards Inc. But the Obama administration turned down the company's request, showing it's drawing a line on federal rescues for troubled financial firms.
In recent weeks, as the prospect of a CIT bankruptcy filing loomed, industry trade groups increased their pitch to lawmakers to prevent the collapse of CIT, which they say would imperil their small-business members and derail the already fragile economy.
CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing, so other lenders taking up all the slack would pose a big financial strain.
The Wall Street Journal and Reuters reported that the company was nearing a deal with bondholders for $3 billion in emergency funding.
New York-based CIT has been negotiating with key bondholders - including bond manager Pimco - in an attempt to avoid a bankruptcy filing. Jeffrey Peek, the company's chairman and chief executive, was actively involved in the talks, according to the person, who spoke on condition of anonymity because the talks are confidential.
CIT has been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company. Rescue talks with government regulators broke off late Wednesday after days of round-the-clock negotiations.
The lender faces $7.4 billion in debt due in the first quarter of next year. Highlighting its woes, CIT was removed from the Standard & Poor's 500 index Friday and replaced with software distributor Red Hat Inc.
CIT, which got $2.3 billion of bailout money in December, had warned that depriving it of more federal aid could imperil about a million corporate borrowers - from Dunkin' Donuts franchisees to retailer Dillards Inc. But the Obama administration turned down the company's request, showing it's drawing a line on federal rescues for troubled financial firms.
In recent weeks, as the prospect of a CIT bankruptcy filing loomed, industry trade groups increased their pitch to lawmakers to prevent the collapse of CIT, which they say would imperil their small-business members and derail the already fragile economy.
CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing, so other lenders taking up all the slack would pose a big financial strain.
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