CIT Group In Talks With Private Equity Firms, While Regulators Offer Little Help


The curtain has all but fallen on the stage of CIT Group, but the lender is fighting for another Act. According to CNBC, the firm is seeking to line up around $3 billion in secured financing from private investors over the next 24 hours in order to stave off bankruptcy, after being turned down for a bailout by the government.

Apparently, there's some interest around: CIT says that private equity firms are interested in talking to the lender about making such a deal, since the firm has valuable rail and airline assets that might come to fruition over time. While the chances of striking a deal with a private equity firm are probably highly plausible, it's not as easy as it looks, either.

Over the past year, private equity firms have shown plenty of willingness to get in on beaten-down regional banks, only to be snubbed by regulators, which have opposed the money managers taking majority stakes in the firms. Eventually, Federal Reserve officials relented on the sale of Florida-based BankUnited to a Blackstone and Carlyle-led consortium, but only after some degree of fuss.

Thus, CIT finds itself in familiar territory to numerous small banks this year, dependent upon permission to move its bad assets out of the financing company and into its bank holding company. So far, regulators have stated that they are unwilling to offer more support of any kind, after the Federal Deposit Insurance Corporation sat for months on CIT's request for further government aid, eventually proving unwilling to help.

Contrary to expectations earlier in the week, the chances don't look good for CIT anymore. But if the firm is able to pull the rabbit out of the hat, it will signal a very significant turning point for risk appetite in general, and certainly for the value of private equity capital.

Disclosure: I own shares in CIT Group
Read my BNET Finance colleague Alain Sherter's take on CIT here.