CIT Group Inc. said Tuesday that it expects to emerge from bankruptcy proceedings on Thursday following a Manhattan bankruptcy court’s confirmation of its prepackaged plan of reorganization.
This story first appeared in the December 9, 2009 issue of WWD. Subscribe Today.
“CIT’s successful emergence establishes a strong foundation for the future of the company,” said ç, chairman and chief executive officer, who noted the company now has a stronger capital structure and an improved liquidity profile.
Last month, CIT posted a $1.07 billion third-quarter loss, due mostly to higher reserves set aside for credit losses from a year ago.
CIT became the fifth-largest bankruptcy in U.S. history — after Lehman Brothers Holdings Inc., Washington Mutual Inc., WorldCom Inc. and General Motors Corp. — when it filed its Chapter 11 petition on Nov. 1. As expected, the filing was just by the holding company, leaving operations such as its factoring group to proceed without interruption.
CIT’s petition listed $71 billion in assets and $64.9 billion in debts.
The U.S. government and taxpayers lost out in the deal as a $2.3 billion loan to the lender, which specializes in financing to small and middle-market firms, under the Troubled Asset Relief Program was wiped out the day CIT filed for bankruptcy.
According to the terms of the reorganization plan approved by the bankruptcy court on Tuesday, most bondholders will get new notes valued at 70 cents on the dollar of old debt, plus equity in the restructured firm. The plan also reduces CIT’s total debt by $10.5 billion and defers debt maturities for three years.
The financial services firm has been struggling since July to restructure its balance sheet.
The company said, upon emergence, CIT is committing $500 million to support its small business lending group, as well as $1 billion in funding for its vendor financing operating division.
Peek has resigned and will step down as chairman and ceo on Dec. 31. Spencer Stuart is conducting a ceo search.