cit group
CIT Group (CIT) is teetering on the edge of bankruptcy -- again -- a day after getting $3 billion from bondholders in emergency financing. The lender said it could still head to bankruptcy court if bondholders reject its debt restructuring proposal.
The problem is that CIT has about $10 billion in debt coming due through next year. If CIT fails, it would be the largest U.S. financial company to go bankrupt since Lehman Bros. last September, Reuters reports.
CIT is a lender to some 1 million businesses, including Dunkin' Brands and Eddie Bauer. How did the company get into such trouble in the first place? Lay part of the blame on its decision to go into subprime mortgages and student loans, says Reuters. The company is $3.3 billion in the hole since the end of 2007.
The Wall Street Journal asked a financial-research firm to look over CIT's $75 billion loan portfolio, and said the findings were pretty bad. Here's what the researchers discovered:
- The company's overall delinquency rate was 4.7%, compared with an industry average of 2.8%.
- Just looking at consumer loans, the delinquency rate jumped to 9.6% compared with the industry average of 4.5%.
- About 5.4% of its commercial and industrial loans had received no payment in several months -- nearly double the average.
- A shocking 16% of its commercial mortgages were no longer being paid. That compares to 2% nationally.
"Across the board, CIT made shakier loans than most other lenders," the Journal reports. "It isn’t hard to imagine some in Congress asking the question: Is this really the type of the lender the U.S. government wants to help keep lending?"
Shares of CIT Group lost nearly 22% of their value Tuesday to close at 98 cents.
CIT Group (CIT) is teetering on the edge of bankruptcy -- again -- a day after getting $3 billion from bondholders in emergency financing. The lender said it could still head to bankruptcy court if bondholders reject its debt restructuring proposal.
The problem is that CIT has about $10 billion in debt coming due through next year. If CIT fails, it would be the largest U.S. financial company to go bankrupt since Lehman Bros. last September, Reuters reports.
CIT is a lender to some 1 million businesses, including Dunkin' Brands and Eddie Bauer. How did the company get into such trouble in the first place? Lay part of the blame on its decision to go into subprime mortgages and student loans, says Reuters. The company is $3.3 billion in the hole since the end of 2007.
The Wall Street Journal asked a financial-research firm to look over CIT's $75 billion loan portfolio, and said the findings were pretty bad. Here's what the researchers discovered:
- The company's overall delinquency rate was 4.7%, compared with an industry average of 2.8%.
- Just looking at consumer loans, the delinquency rate jumped to 9.6% compared with the industry average of 4.5%.
- About 5.4% of its commercial and industrial loans had received no payment in several months -- nearly double the average.
- A shocking 16% of its commercial mortgages were no longer being paid. That compares to 2% nationally.
"Across the board, CIT made shakier loans than most other lenders," the Journal reports. "It isn’t hard to imagine some in Congress asking the question: Is this really the type of the lender the U.S. government wants to help keep lending?"
Shares of CIT Group lost nearly 22% of their value Tuesday to close at 98 cents.
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