CIT Group Again in Dire Straits

Commercial lender CIT Group is again on the brink of bankruptcy as it seeks to craft an exchange that would cut its debt and offer bondholders an equity stake in the company. CIT is preparing an exchange offer that would eliminate as much as 40% of its more than $30 billion in outstanding debt, the Wall Street Journal said, citing anonymous sources. The exchange would hand control of the company over to its bondholders and wipe out common stockholders, according to the report. The Journal added that if the debt exchange with key bondholders fails, CIT Group would seek bankruptcy protection in order to restructure its operations. CIT spent the summer trying to stave off a potential collapse amid mounting loan losses and rising funding costs. It received $2.3 billion in federal bailout aid last fall, a $3 billion emergency loan in July from some of its largest bondholders and completed a debt repurchase program in August to help ease its cash crunch. Those measures, however, may not be enough. The company has said it needs to continue to reduce its debt burden to survive. CIT serves as a short term financier to about 2,000 vendors that supply merchandise to about 300,000 stores, according to the National Retail Federation. Analysts have said 60% of the apparel industry depends on CIT for financing.