CIT files for bankruptcy and the aftershocks begin

Icahn's try to throw out CIT's board in order to take carry out didn't work. Neither did CIT's effort to sell debt for equity. The debt holders only didn't buy a story.

Instead, with a $1 billion DIP loan from Icahn, CIT has filed for bankruptcy. The debt holders didn't wish to do it voluntarily, as well as right away CIT will try to force a sell in court. They devise to things a stream debt holders with new records (of revoke face value) as well as equity as partial of a restructuring plan. But those who owned CIT CDS insurance should be happy - they will right away get paid out.

CIT claims it will emerge from bankruptcy in a couple of months. But it's unclear their commercial operation indication is viable during all, even if they revoke their outstanding debt. It is expected a stream debt holders will put up a fight to pull for a liquidation.

In any case, with debt recuperating during 60-70 cents upon a dollar, a $2.3 billion of TARP money CIT perceived as elite equity is expected gone.

The event has been at large anticipated. The marketplace reaction upon Monday will expected be certain as a doubt has been somewhat taken out. But a longer-term disaster this will emanate can not be overstated. CIT has liens upon hundreds of thousands of businesses via loans a organisation had extended. Many of those businesses are stranded since a liens prohibit them from additional indebtedness. That equates to they can not take out new loans from others (without entirely repaying CIT) in their try to replace CIT as their lender. The routine of replacing CIT will be unpleasant as well as chaotic, receiving it's fee upon a center marketplace companies over a next few years.



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