Moody’s Investors Service’s decision to downgrade the US lender’s
debt rating.
Moody’s had issued a downgrade on CIT’s unsecured rating to Baa1
from A3 on May 30. The move is a blow to the financial group, which
is already having a tough time with funding in the wake of the
credit crunch.
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Non-deposit taking financial institutions like CIT rely heavily
on the capital markets to fund their businesses.
In a statement, released on the same day, CIT said it disagreed
with Moody’s decision, pointing out that over the past 60 days it
had raised US$1.6bn in new capital, completed financings of about
US$1bn, sold over USD$2bn of assets at approximately their book
value and underwrote US4600m of loans at the CIT Bank.
CIT added that it would continue to advance other key
initiatives including a previously announced sale of discrete
business units and asset portfolios.
In March CIT turned to emergency funding from unsecured US bank
credit facilities, drawing down completely its US$7.3bn credit
line.
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By GlobalDataFollowing this, Standard and Poor’s lowered its counterparty
credit ratings one notch to A-/A2 and held a negative outlook on
CIT.
CIT has been working on selling off non-core assets in a bid to
raise up to US$7bn in proceeds. It also said it would consider
finding a strategic partner to help fund its lending and leasing
activities. Analysts have warned that CIT may face renewed cash
problems by October if it can’t execute its funding strategy.
