CIT Rescue Is Stop-Gap Measure

CIT Group Inc. may be close to securing rescue financing from its bondholders but within weeks it is likely to be right back where it started and with JPMorgan Chase & Co., a creditor, poised to wield the sword to cut the Gordian knot.

How could it do it? A commitment of $2 billion in rescue financing on the back of a bankruptcy that could allow CIT's small business customers to be identified, in effect, as financing the company, followed by a good bank-bad bank split.

CIT lends to around 1 million mostly small and midsize businesses and has a large business providing cash to manufacturers and collecting on their invoices, a service known as factoring. It has funded its activities largely by selling bonds and was hit when credit markets seized late last year.

Read Full Article from Wall Street Journal

- Posted: 2009-07-20 10:47:37

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