CIT Group, the US SME credit giant, files for bankruptcy

This is the fifth largest bankruptcy in the United States. The subsidiaries continue their activity.

The US financial institution CIT Group has placed Sunday 1 November, under the protection of bankruptcy (Chapter 11). During the summer, the US Treasury had refused him another boost. In December 2008, the latter had advanced $ 2.3 billion, like other banks in difficulty. This bankruptcy filing does not concern its subsidiaries and in particular CIT Bank, which continues their activities.

In August, CIT was unable to repay $ 1 billion of its bond debt. According to documents submitted to the Bankruptcy Court of the Southern District of New York, the assets of CIT amount to 71 billion dollars (48.1 billion euros) and its debts to 65 billion dollars.

This is the fifth bankruptcy – in order of importance of the assets involved – in the history of the United States, behind those of Lehman Brothers (691 billion dollars) and Washington Mutual (327.9 billion) in 2008, WorldCom (103.9 billion) in 2002, General Motors (91 billion) in 2009.

Founded in 1908 and headquartered in New York, CIT is a bank holding company specializing in financing and advising small and medium-sized businesses. It boasts more than one million customers in fifty countries. It is the leader in factoring for SMEs and one of the largest issuers of loans for SMEs, especially in the retail sector- Webskitom payday loan uk same day.

” In the short term, this bankruptcy filing will cause difficulties for start-ups and small borrowers,” said Jean Everett, a partner at Hiscock & Barclay, Bloomberg agency. CIT also lends to large groups of aeronautics, defense, rail and new technologies, for example to Dell, Microsoft or Toshiba.

Negotiations have been laborious with its bond creditors, foremost among which is the investor Carl Icahn, famous for chasing the founder of Yahoo !, Jerry Yang. An agreement was reached Friday, October 30, with 90% of the 85% of creditors who participated in the consultation.

Under the terms of the agreement, Carl Icahn will contribute $ 1 billion; the creditors will become the main shareholders of CIT Group; they will see their consolidated debts up to 70% of the original debt. The indebtedness of CIT should be reduced by ten billion dollars, of which 5.7 billion were due between 2009 and 2017.

“Vital Sector”

In a statement released on Sunday, the group hopes the bankruptcy court will “quickly” confirm the restructuring, which will enable it to “significantly reduce its liquidity needs over the next three years, improve its capitalization ratios and accelerate its capitalization. return to profitability “.

Jeffrey Peek, CEO of CIT Group, said the terms would allow his group “to continue to provide financing to its SME customers, a vital sector for the US economy.” CIT’s share price collapsed 20% on Wall Street on Friday after the announcement of Mr. Icahn’s acceptance of the reorganization plan that paved the way for his bankruptcy filing. It is no longer listed from Monday, November 2nd.

On Monday, in the Asian markets, the euro rose to 1.4762 dollars against 1.4715 Friday, under the effect of the news of this bankruptcy.