CIT may be near a deal for funds
CIT Group Inc., the struggling lender denied more federal aid last week, may be close to securing needed funding to avoid bankruptcy, a source close to the matter said.
A deal could be struck as early as today, said the source, who spoke on condition of anonymity because the talks were confidential.
The company’s board met Sunday night to discuss its options, the source said.
The New York firm is a key provider of factoring services, supplying quick cash for businesses that have significant upfront costs for material and labor. It plays a major role in keeping the retail industry running, financing about 2,000 vendors that supply merchandise to 340,000 wholesalers and retailers nationwide.
Many in the apparel industry were concerned that a bankrupt CIT could lead to more troubles in the shaky retail industry.
A financing deal doesn’t necessarily mean that the retail industry will be spared economic difficulties, said Ilse Metchek, president of the California Fashion Assn. CIT’s struggles probably portend stricter rules for lending in the garment industry, she said.
“It will help in that it’s better than disaster,” she said about a potential deal. “But it’s going to mean much stricter rules and higher limits on financing.”
CIT has $1 billion in long-term debt payments due in August, and says it needs $10 billion in funding by March.
The company’s troubles began when tighter financial markets made it difficult to secure funding for its loans to small businesses.
The company reported a loss of $438 million in the first quarter and $3 billion over the last two years. It has assets of $76 billion.
CIT, which picked up $2.33 billion in federal bailout money in December, lost its bid last week for more federal funds. The Treasury Department said it was sticking to a “very high threshold for exceptional government assistance to individual companies.”
Still, the new loan, which would come with high interest rates, would probably be a stopgap measure, according to the Wall Street Journal, which first reported the potential deal.
Its shares, which traded above $51 two years ago, closed Friday at 70 cents, up 29 cents.
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