Friday, October 2, 2009

A 350-page "good-morning"!!!!! (CIT)

TONS of new common equity - all we need to know now is how many new shares to divide by. Uh....

I'm looking for some value for common shareholders in CIT Group's (CIT) "extra-info" documents filed a few hours ago. Common shares are up 19% or twenty cents in premarket trading, as the company does the "balance-sheet-shuffle." Not to get all crazy on ya, but there may be some common shareholder value left here...Maybe. The balance-sheet shuffle is turning debt holders into new preferred equity holders. The question remains as to what will be left for silly "common" shareholders.

Last night CIT announced that the "debt for something else" swap would proceed, and the race to guess what will be left for common shareholders began. I'm on page 60 and am not sure yet. :(

Below is a look at the new proposed balance sheet, yet we don't know what the new dilution will be. Bloomberg says 94% of the new "company" will be owned by bondholders. That would leave $670million, or $1.77 per share for current common shareholders. Again, that amount could be quickly wiped out if CIT's assets (loans) take a hit.

Then on page 178 they talk about the new ownership structure some more, suggesting that current common stock owners will own 2.5% of the new common stock -->> based on the new balance sheet figures that would be $282million or 72cents per share. This is a total mess, and as I said yesterday, STAY AWAY!!

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