Like the contents of a supermarket bargain bin, the dent in the world’s biggest can-maker Rexam is much deeper than it looked at first sight. What had seemed like a clever way to avoid losing investment-grade status for its debt has turned into something much worse, and Wednesday’s rights issue is only a step away from a rescue by shareholders.
It looks like CIT has once again narrowly escaped falling over the edge after a group of bondholders agreed to extend $3 billion to the troubled lender in exchange for high-quality collateral and juicy interest rates. The thing is CIT still needs to sort out its failed business model based on borrowing in credit markets to provide financing to small and medium-sized businesses. But as we’ve seen again and again in this credit crisis, relying overwhelmingly on markets can sink even well established banks – think Northern Rock.