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CIT Group's future remains up in the air after bankruptcy filing

The 101-year-old lender's months-long financial struggles have been a boon to rivals, which have picked up hundreds of its clients.

November 03, 2009|Julie Wernau

On the heels of its bankruptcy filing, CIT Group Inc.'s future as a commercial lending giant will be determined by the confidence of its creditors and customers.

The 101-year-old lender's months-long financial struggles already have been a boon to rivals, which have picked up hundreds of CIT clients. But it is unclear whether those rivals will have the means to pose a real threat.

With $71 billion in assets, CIT serves 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. The company's Chapter 11 bankruptcy filing Sunday is one of the biggest in U.S. corporate history, with liabilities totaling $64.9 billion.

"We would hope that other lenders would step up should disruption occur," said Brian Dodge, spokesman for the Retail Industry Leaders Assn., which counts some of the largest retailers in the U.S. among its members.

With many CIT debt holders supporting a prepackaged restructuring plan, the company said it expected to come out of bankruptcy proceedings within two months.

After filing for Chapter 11, the company obtained a $1-billion line of so-called debtor-in-possession credit from billionaire investor Carl Icahn.

Adam Steer, an analyst with CreditSights, predicted that the reorganization plan would pass muster with the Bankruptcy Court. It would give bondholders a combination of new debt and new shares.

A total collapse of CIT, which received $2.3 billion in federal aid last fall, would strain its rivals.

"It would be devastating to see something like this fail," said Michael Cipriani, senior vice president of Rosenthal & Rosenthal, a New York financing firm.

Cipriani said his firm had picked up more than 100 CIT clients since the summer, when the lender's woes intensified.

Ike Silvera, chief operating office at New Jersey-based retailer Spencer Gifts, which obtained $172 million in credit from CIT, said he viewed the bankruptcy filing as the beginning of the end of the lender's troubles.

"We're looking forward to them going through this process and coming out the other end," he said.

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jwernau@tribune.com

The Associated Press was used in compiling this report.

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