Global vendor finance agreements totalling hundreds of millions
of pounds in value are under threat after CIT Group filed for
bankruptcy protection last night.
CIT Group’s board of directors voted to proceed with a
prepackaged plan of reorganisation of the company that could result
in the lender’s giant finance agreements with the likes of Dell,
Avaya and Toshiba coming up for grabs.
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Under the plan, the giant US-based lender expects to reduce
total debt by approximately $10 billion as well as “significantly
reduce its liquidity needs over the next three years [and] enhance
its capital ratios”.
The company, which funds about one million businesses, listed
$71 billion in assets and $64.9 billion in liabilities in its
Chapter 11 petition yesterday in the US Bankruptcy Court in
Manhattan.
According to Bloomberg, the news agency, as a result of the
prepack, the US Treasury Department expects the US government will
not recover much, if any, of the $2.3 billion in taxpayer money
that went to CIT.
None of CIT’s operating subsidiaries, including Utah-based CIT
Bank, were included in the filing, and operations will proceed as
normal, CIT said in a statement.
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By GlobalDataCIT asked for court permission to borrow $500 million from Bank
of America Corp., saying the loan would fill a financing “void”
after other lenders refused to extend it more credit.
The company has $1 billion from investor Carl Icahn to fund
operations while it reorganises. The credit line, to be drawn on
until December 31, will be a so-called debtor-in-possession loan.
It also expanded its $3 billion credit facility by another $4.5
billion on October 28.
CIT asked U.S. Bankruptcy Judge Robert Gerber to schedule a
confirmation hearing on its reorganisation plan as soon as possible
after December 1.
Brendan Malkin
