CIT Hires Bankruptcy Adviser

CIT Group Inc. (CIT), is preparing for a possible bankruptcy filing after so far failing to win the government’s assistance for a federal debt guarantee, the WSJ said in a report filed Saturday.

From the WSJ:

CIT has retained the law firm of Skadden, Arps, Slate, Meagher & Flom LLP…[according to people familiar with the matter].
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CIT [a financier to almost a million mostly small and midsize businesses across the country] has a $1 billion payment due in mid-August and it is unclear the company “will be able to handle that,” said [those familiar with the situation]. The company will give more guidance when it discusses second quarter earnings in two weeks.
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A bankruptcy filing by CIT could affect thousands of small borrowers, from Dunkin’ Donuts franchisees to restaurant owners and clothing retailers.
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The company’s most pressing issue…is that it has a debt payment coming due in August. In all, CIT has about $2.7 billion that comes due this year and $8 billion more due next year.
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[T]he government has made it clear it doesn’t see the company as a systemic risk to the financial system. The people familiar with the matter said the government feels that other lenders, such as J.P. Morgan Chase & Co. or Deutsche Bank AG, can handle many of the same loans that CIT specializes in, such as loans to small retailers or rail-car leasing firms.

Meanwhile, competitors like GE Capital Corp. and GMAC LLC have been able to sell debt with the backing of the government’s top credit rating.

CIT had about $76 billion in assets and $68 billion of liabilities as of March 31st, ’09.