Thursday, July 16, 2009

CIT fails to secure (more) government help (CIT)

AlphaNinja - CIT Group (CIT) has been turned down by the government. Apparently it is not too big to fail, but too small to save. The common stock is down 78% to 37cents. That the common is wiped out does not surprise me - what surprises me is that with all the other bailouts, the government abandons this company, a major lender to American small business.

The company issued this release:

July 15, 2009 06:03 PM Eastern Daylight Time
CIT Announces That Discussions with Government Agencies Have Ceased
NEW YORK--(BUSINESS WIRE)--CIT Group Inc. (NYSE: CIT), a leading provider of financing to small businesses and middle market companies, today announced that it has been advised that there is no appreciable likelihood of additional government support being provided over the near term.

The Company’s Board of Directors and management, in consultation with its advisors, are evaluating alternatives.

Women's Wear Daily noted risks to the retail industry. Summary from briefing:

WWD reports the retail industry is facing potential turmoil after CIT, which provides basic financing for thousands of small- and midsized apparel retailers and vendors, said Wednesday it probably won't be rescued by a federal bailout. The disclosure raised the possibility of a bankruptcy filing by the financial giant and left many vendors and retailers in limbo about how they'll finance their fall shipments and finance their businesses. "This is terribly upsetting," said Gary Wassner, president of Hilldun Factors. "This will upset the entire shipping season. It will be very disruptive. I am surprised that the government would not think about the thousands of people that would be affected. This also impacts so many people on the periphery [of the apparel industry]."

The administration is betting that other bailed out entities will step in to fill the lending needs of businesses currently dealing with CIT.

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