The US taxpayers will not recover on the 2.3 billion in stimulus money which went to CIT – now a chapter 11 debtor.  One has to wonder why CIT did not file chapter 11 sooner, if that was where it was headed anyway and saved the country 2.3 billion in money which went to “float the boat” a bit longer, even though the boat was still sinking.  “CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy to cut $10 billion in debt after the credit crunch dried up its funding and a U.S. bailout and debt exchange offer failed….According to the petition, CIT’s largest unsecured claim holders were Bank of America Corp., as collateral agent for a $7.5 billion claim, and Bank of New York Mellon Corp., as a trustee for retail bonds with a claim of $3.2 billion. Canadian senior unsecured notes have a claim for $2.1 billion, and Citigroup Inc. also has a $2.1 billion claim as an administrative agent to bank debt due 2010. CIT had said in its Oct. 2 outline of a prepackaged plan that it would give most noteholders new notes at 70 cents on the dollar plus new common stock….”

Because of CIT’s many interconnections within US business, its reorganization could be very messy.  For example, CIT has 70% of all short term factoring in the US; “CIT has said it’s the third-largest U.S. railcar-leasing firm and the world’s third-biggest aircraft financier”; and it has outstanding loans to over 1 million businesses in the US, including Dunkin Brands.   

Here is the link to this story: http://www.bloomberg.com/apps/news?pid=20601087&sid=a3.t_GrxbL2U

 Michael