Jul 20, 2009
The $3 billion worth of CIT bondholder pledge might not be enough to avoid a CIT failure. According to Renee Dailey, CIT has “indicated they have significant upcoming maturities”. The commercial lender has around $10 billion of debt that’s maturing next year. It also has to deal with dwindling market share, mounting loan defaults, and other problems related to the economy.
CIT just announced its agreement bondholders; the rescue funding is designed to keep the 101-yr-old institution stable enough to avoid bankruptcy. The first $2 billion of the deal is immediately available while the rest will be received in the succeeding 10 days. While these efforts are certainly commendable, it is not nearly enough. Already, the company has said that this is just the first step. It is also asking debt holders to decrease their claims. In addition, there is a bigger restructuring plan on the drawing board.
What Brought CIT on the Brink of Collapse?
The first question in everyone’s mind is, was CIT as irresponsible as some of the country’s largest banks? It would seem that they were more of a victim of adverse economic conditions rather than a perpetrator of it. Over the last eight quarters, this century-old company has had to deal with $3 billion worth of losses from student loan, home mortgage, and commercial defaults.
However, unlike Citibank and company that were deemed “too big to fail”, it would seem that the government thought CIT shouldn’t get second cash infusion. It is fortunate that the group of bondholders stepped in after the government declined CIT their request. The loan extended to the company is said to be backed by a mix of corporate debt, medium-sized company loans, and even aircraft credits. To get this funding, CIT has pledged assets that have a face value of $30 billion.
- GMAC LLC Changes Its Name to Ally Bank
- Citigroup Loses $7.8 Billion in the Fourth Quarter
- What is Debt Counseling and is it important?
- Corporate Bailout – Did the Government Earn Money？
- Obama Middle-Income Plans: Where Do You Fit In?
- When to Refinance Your Mortgage
- CIT Bankruptcy – SMEs’ Future Uncertain
- America’s Uncounted Debt
- Where did the Banks Spend the Bailout Money?
- Bank of America Now Closing in on the $33.9 Billion Gap