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CIT Trading Halted as Lender Awaits Word on U.S. Aid (Update1)
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By Linda Shen
July 15 (Bloomberg) -- CIT Group Inc., the commercial lender pleading for a federal bailout, had trading halted amid speculation that regulators are close to a plan that would rescue the New York-based lender.
The New York Stock Exchange stopped trading in CIT shares, citing “pending news.” U.S. aid including a temporary loan may be announced in the next 24 hours, Reuters reported, citing a person familiar with the matter. Alternatives include access to the Federal Reserve’s discount window and asset transfers, with no guarantee any plan will emerge, Reuters reported.
Messages to CIT spokesman Curt Ritter weren’t immediately returned.
Regulators at the Treasury, Federal Reserve and Federal Deposit Insurance Corp. have been debating whether to risk more taxpayer funds, on top of the $2.33 billion granted to CIT in December, to keep the lender afloat. Standard & Poor’s said this week CIT may go bankrupt without U.S. help. New York-based CIT’s supporters point to 1 million customers who may lose funding, including about 300,000 retailers.
CIT has battled cash shortages and faces $1 billion of bonds maturing next month. The company, once the biggest independent commercial lender in the U.S., gained 1.9 percent to $1.64 before trading was halted. The stock, which dropped 64 percent this year, sold for more than $60 in February 2007.
“CIT is most certainly too important to the retail industry to be allowed to fail, and the retail industry is too important to the economy to be placed under additional stress,” Tracy Mullin, chief executive of the National Retail Federation, said today in a letter to Treasury Secretary Timothy Geithner. A CIT failure would “impact thousands of retailers” and “that cannot be allowed to happen at a time when retailers are already struggling to survive the national recession.”
‘Crippling Impact’
Kevin Burke, chief executive officer of the American Apparel & Footwear Association, said a CIT bankruptcy could have a “crippling impact” on manufacturers.
“There is no level in the supply chain that CIT Group does not touch, from the suppliers of thread and material to the manufacturer, to the retail shelf,” Burke said today in a letter to Connecticut Democratic Senator Christopher Dodd.
CIT’s record includes eight straight quarterly losses totaling $3.4 billion after forays into subprime mortgages and student lending. Analysts are predicting losses the rest of this year, including $346 million when second-quarter results are reported on July 23, according to a survey by Bloomberg.
President Barack Obama was briefed on the status of CIT during his regular meeting with economic advisers this morning, administration spokesman Robert Gibbs said.
“It was just a general briefing on what’s going on,” Gibbs said. He directed queries on CIT to the Treasury, where spokeswoman Meg Reilly didn’t respond to requests for comment.
To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.net.
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