CIT Group filed for bankruptcy as of November 1, citing the exposure from subprime mortgages, and credit tightening. CIT, which was founded 101 years ago, is the 6th largest commercial lender, the number one lender for small and mid-sized business, and a leader in funding minority and women owned businesses. The lender’s bankruptcy filing is a pre-packaged plan, structured to exit bankruptcy on a fast track. CIT is making every effort to ensure the customers remain funded, with little or no interruption to their other operating businesses. CIT’s other profitable units, including CIT Bank, were not included in the bankruptcy filing. According to court documents, CIT will have immediate access to $125 million from a total of $500 million in a debtor-in-possession (DIP) loan* from Bank of America. They have also requested are requesting the ability to make intercompany loans, as it makes its way out of bankruptcy, which is expected in early December. 
The New York based lender, which funds 1-million businesses, has received $1 billion from investor Carl Icahn, for operating costs while it reorganizes. It doesn’t appear that the government will recover much of the $2.3 billion in bailout funds, which is essentially tax-payer money, and unfortunately share holders will be wiped out according to the bankruptcy plan. Financial institutions don’t have a good record for recovering from bankruptcy, but it looks as though CIT has secured $1 billion in investor funding to support their operation, and the DIP loan from Bank of America and a well thought out exit strategy to beat the odds. ______________
*Debtor-in-possession (DIP) loan, is a special form of financing provided for companies in financial distress or under Chapter 11 bankruptcy process
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K Reilly
Cohn-Reilly Report / News Flash
Note: Political Cartoon illustration by: Denis Elmore
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