CIT Group bankruptcy filing leaves US taxpayers holding a $2.3 billion loss

November 2, 2009

(ChattahBox) — CIT Group Inc., one of the nation’s leading funders of small and medium-sized businesses, filed for bankruptcy Sunday as part of a reorganization plan that has the support of an overwhelming majority of creditors but will end up leaving US taxpayers holding a $2.3 billion loss.  In the bankruptcy filing the fifth largest by assets in U.S. history, CIT said it had $71 billion in assets and $64.9 billion in liabilities. Only Lehman Brothers, Washington Mutual, Worldcom and General Motors had more in assets when they filed for protection.

In a statement, the 101-year-old company said it is asking the U.S. Bankruptcy Court for the Southern District of New York for a quick approval of the prepackaged plan. CIT said none of its operating subsidiaries would be affected by the filing, allowing them to continue operations. The filing marks the culmination of months of bargaining among CIT, its creditors and the federal government over the company’s fate. CIT provides working capital to small firms such as shops, their suppliers and restaurants, many of whom are already struggling in the recession.

“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said CIT chairman Jeffrey M. Peek.

Although the company will keep operating, it is unlikely to be able to make the same number of loans as before and comes ahead of the crucial Christmas season.  And by filing for bankruptcy taxpayers will lose the $2.3 billion investment they made in CIT as part of the government’s sweeping financial rescue last fall, marking the first such loss of the bailout program.  Creditors will end up owning the company, while common and preferred shareholders, including the US government, will be wiped out by the plan.

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One Response to “CIT Group bankruptcy filing leaves US taxpayers holding a $2.3 billion loss”

  1. GM to Repay $6.7bn Loan Early but 46 Companies Behind on TARP Payments | ChattahBox News Blog on November 16th, 2009 8:04 am

    […] CIT Group, one of the nation’s leading funders of small and medium-sized businesses, who is in bankruptcy court after receiving $2.3 billion from the Troubled Asset Relief Program. By filing for bankruptcy, […]

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