CIT Group (CIT) intends to file for bankruptcy protection in New York within days, perhaps as early as Sunday, the WSJ reports, citing people familiar with the matter.
The filing, which was overwhelming approved by creditors in support of a prepackaged bankruptcy protection and comes as a consequence of the lender’s inability to obtain the required number of consents for its exchange offer, is aimed at lowering the firm’s liabilities and keeping it in business.
The creditors support of the co.’s prepack bankruptcy plan will affect only the holding company and one finance unit, and involves giving bondholders new debt worth 70% of the face value of their old debt, plus giving them an ownership stake in the co. equal to about 92.5% of the common stock.
The creditors support also includes that of billionaire investor Car Icahn who last week was pushing for CIT to stop making new loans and instead collect money from its existing loans and use the funds to pay off creditors. Mr. Icahn said he changed his mind on the prepackaged bankruptcy plan because he was pleased by changes the company made, including the acceleration process adopted by the CIT for appointing new directors.
“These changes significantly improve corporate governance and cash flow protections, and are positive for the company and all noteholders,” he said in a statement.
The below interview by FBN with Mr. Icahn should bring some clarity on his plans:
Worth noting here that in return for Mr. Icahn’s support for the plan, CIT obtained a $1 billion line of credit from Icahn Capital LP — which could be drawn as DIP financing in the event of a bankruptcy — to provide supplemental liquidity for CIT as it pursues its prepackaged plan.
The pre-packaged deal means passage through the bankruptcy court is now expected to be swift with the company emerging as soon as the end of the year.
With more than $70 billion in assets, CIT would be the fifth-largest bankruptcy filing in U.S. history, trailing only those of Lehman, WaMu, Worldcom, and GM. CIT’s Utah bank, note the Journal, which has about $10 billion in assets, wouldn’t be part of the bankruptcy filing.
One likely loser from a bankruptcy would be the U.S. Treasury. The $2.3 billion in TARP money injected late last year by the regulator to help stabilize the incompetently run lender, which was weighed down by billions of dollars of bad student loans and subprime mortgages, is likely to be wiped out.
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This article like many in the media for weeks is pure contradictory and assanine to still read day after day. David Faber of CNBC on Friday likewise should be investigated by SEC for his all-knowing report about bondholder vote counts, when CIT itself to me in a telephone conversation, told me the votes would not be fully known until late this weekend- so how can CNBC or this article’s reporter know any inside salient details of such count unless federal felony securities fraud is going on at the expense of millions of US taxpayers and investors all about to be finanically ruined holding CIT preferred and common stock… And to see such consumer finanical ruin at this time of the year with Christmas ahead of us all will only add to decimation of the overall US economy for sure now…
CIT which I and millions are shareholders in, have NOT come out with tally of the bondholder votes as of yet, so how can this reporter post such garbage?
Has nobody thought about all the millions of shareholders like myself, even CIT executives who own a lot of common stock, and thousands of 401k’s filled with CIT stock that now will devastate millions of people because of all of this bakruptcy talk for month by a very bissed and criminal media out there seemingly hell-bent on seeing total dustruction of this corp and its stock as well as affect onto millions of small family investors in the process…??!
Why has the US government not stepped in by now seeing this media circus play out since June/July, as there have always been many options disregarding BK, and other companies have been able to reorganize without BK and come out better and not see their stock decimated like this, and the ruin of millions of US investors holding hard earned monies invested into CIT group for a long time now..
CIT Group failed many times, but hopefully this time it is forever. This bankruptcy is long overdue. Why we keep propping up TURDS like CIT Group I will never understand.
“Has nobody thought about all the millions of shareholders like myself, even CIT executives who own a lot of common stock, and thousands of 401k’s filled with CIT stock that now will devastate millions of people because of all of this bakruptcy talk for month by a very bissed and criminal media out there seemingly hell-bent on seeing total dustruction of this corp and its stock as well as affect onto millions of small family investors in the process…??!”
Yes. And what we thought was: “Serves the idiots right for chasing a crap stock up a stripper pole without knowing what they bought.”
This bankrupcy has been on the cards for a long time, it wasnt the media that killed it.. in no way can you blame the media. It was the firms mis-management, and yes all stock investors shouldnt get anything because thats what buying stocks are and what you risk with it. If you dont like that, then go into bonds with your 401K plan if its so important perhaps you should have controlled your risk better.
We have clearly pointed out in several of our CIT articles (including this one) how badly and ‘incompetently run’ CIT was and still is by its mngmnt and its clueless CEO J. Peek, who will most likely walk away with a fat comp for driving your shares into pink status and subsequent zero value…While we honestly relate to your difficult position as a shareholder of a junk stock ; it would be only fair to point out that diving long into a balance sheet with negative (-430%) (that’s Four Hundred Thirty) profit margin ; close to (-40%) in ROE, (-$140+) Million in operating cash flow, $54 Billion in debt, and over (-$2.5) BILLION as a Net Income-Avl-to-common — (and by the way…we aren’t talking here, last week or last quarter’s data, more like trailing twelve) — it seems to us that the only logic driving investor-inclination toward this trade is either dump it if u already own the shares, or short the heck out of ’em. It’s a no brainer. Looking at the statistical analysis of the correlation between the co.’s fragile deteriorating biz conditions and stock performance the outcome is quite obvious. Clearly, applying linear thinking under these dynamics is a mistake.
In terms of the article being contradictory and devoid of intelligence..that’s simply not fair. We’re accurately reporting the facts as they develop. Nothing more, nothing less. Again, we respect your opinion, but couldn’t more strongly disagree with insinuations made which are completely unfounded.