Could Goldman pinch CIT?

July 15, 2009

It appears the federal government is on the verge of walking away from CIT Group and the same can be said for Goldman Sachs–even though the investment firm is one of the mid-market lender’s biggest bankers.

On Monday, I suggested that Goldman CEO Lloyd Blankfein could turn around the public’s nasty impression of his Wall Street firm by stepping in an buying-out CIT. But I didn’t really expect it to happen. Then yesterday there was a rumor floating around that Goldman, with the tacit support of the Obama administration, was trying to put together a private-sector bailout package for CIT.

That rumor, however, proved to be idle hedge fund specuation. It doesn’t appear Goldman, which says it has no material exposure to CIT, will be part of the CIT solution. Goldman says it has sufficient collateral from CIT and from unspecificed hedges, to minimize any of the risk it may have on a $3 billion secured line of credit.

But it appears Goldman may have a good reason to stand pat and let CIT sink or slowly drown. A hedge fund source just reminded me that last October–just as the financial world was melting down–Goldman announced it had closed a $10.5 billion fund to make “senior secured loans” to companies.  This is how GS Loan Partners describes itself on a Goldman website:

Our focus is on originating loans for mid- to large-sized leveraged and management buyout transactions, recapitalizations, refinancings, financings, acquisitions and restructurings for private equity firms, private family companies and corporate issuers.

Leaving aside the LBO-stuff, that sounds a lot like the kind of business CIT had been famous for. It makes you wonder if there is any angle Goldman isn’t playing?


The federal bailout option is dead. Is Goldman licking its chops?

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