Monday, November 2, 2009

CIT files for prepackaged bankruptcy, shares off 67% (CIT)

Well, 67% or 48cents. Last night, CIT Group (CIT) announced that the vast majority of the debtholders had agreed to management's plan to reorganize the company.

From the release:


"Under the plan, CIT expects to reduce total debt by approximately $10 billion, significantly reduce its liquidity needs over the next three years, enhance its capital ratios and accelerate its return to profitability."

Reducing debt by $10billion would necessarily wipe out the common stock, and the company lays it out just like that:


"Under the proposed prepackaged plan of reorganization, all existing common and preferred stock will be cancelled upon emergence."


I mentioned on October 13th:

-->>"In the "balance sheet shuffle," a lot would have to go right for there to be any value left for common stockholders. The shares are likely headed to zero."

The "balance sheet shuffle" was in reference to the tiny sliver of equity available to prevent the common stock from heading to zero:


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