Increasingly, the question seems to be when – rather than if – troubled commercial lender CIT will file for bankruptcy.
The lender has faced a series of end-of-the-world deadlines and won an equal number of eleventh hour reprieves, but its grasp on life remains tenuous. Last month, for instance, Bloomberg reported that the advisers to the very same bondholders who gave the group a $3bn lifeline were pushing for a “restructuring through bankruptcy”. Perhaps more tellingly, even the US government has declined to offer a helping hand.
Against this tumultuous background, CIT’s SEC filing on Tuesday was not unexpected. In it, the lender said it would not be able to file its second-quarter 10-Q by the prescribed deadline of August 10 “without unreasonable effort and expense”. (For a cash-strapped company with a broken business model, most expenses would be considered unreasonable.)
As for that will they-won’t they bankruptcy filing, here’s the relevant paragraph (emphasis FT Alphaville’s):
the Company and a Steering Committee of the bond holder lending group do not intend for the Company to seek relief under the U.S. Bankruptcy Code, but rather will pursue restructuring efforts as part of the comprehensive restructuring plan to enhance the Company’s liquidity and capital position. If the pending tender offer is not successfully completed, and the Company is unable to obtain alternative financing, an event of default under the provisions of the Credit Facility would result and the Company could seek relief under the U.S. Bankruptcy CodeShareholders, at least, are not optimistic. CIT’s stock had fallen more than 20 per cent within five minutes of opening trade in New York.
Related links:
CIT would be fourth-largest bankruptcy in US history – FT Alphaville
Warning over CDO losses if CIT defaults – FT