CIT Group Inc on Sunday filed a voluntary Chapter 11 petition seeking bankruptcy court protection from creditors.
This story first appeared in the November 2, 2009 issue of WWD. Subscribe Today.
The filing, in a Manhattan bankruptcy court, is the fifth largest in US history after Lehman Brothers Holdings Inc, Washington Mutual Inc, WorldCom Inc and General Motors Corp. According to the petition, the company listed $71 billion in assets and $64.9 billion in debts.
The filing also lists Bank of America as its largest unsecured creditor, which is owed $7.5 billion. Bank of New York, the second largest unsecured creditor, is owed $3.2 billion.
CIT said it has over 100,000 creditors. It listed in its filing 75 top unsecured creditors holding claims valued at $45.3 billion.
The filing, a pre-packaged restructuring plan, has the support of CIT bondholders. CIT said on Sunday that it hopes to exit bankruptcy by yearend.
The filing by the holding company did not include any operating divisions. The factoring arm, a vital source of lending for apparel firms, continues operations as usual without any disruption of services to its clients. Its commercial services division is also a major lender to many retailers. Under the terms of the pre-packaged restructuring plan, most bondholders would get new debt at 70 percent of the face value of old debt, plus equity in the company.
One big loser is expected to be the US government, which provided the lender to small- and middle-market firms $2.3 million under its Troubled Asset Relief Program in exchange for preferred shares. CIT has been on bankruptcy watch since July, and has spent the past four months trying to restructure its debt load.