CIT to emerge from bankruptcy
CIT expects to exit bankruptcy protection on December 10, having filed for it only 40 days previously on November 1. (Chasan, Reuters)
The firm, one of the largest financial victims of the credit crisis, will be the first of the financial bankruptcies to emerge from bankruptcy protection, unlike Lehman Brothers, Washington Mutual, IndyMac and other financial companies that have been unable to continue on their own.
CIT’s reorganization plan will reduce its debt by about $10.5 billion and defer significant debt obligations for three years, CIT said.
Under the plan, CIT’s unsecured debtholders are to receive 70 cents on the dollar of new notes, plus new common stock. The company had won support from bondholders for the plan substantially in excess of the minimum amount required under U.S. bankruptcy law.
Common and preferred stockholders, including the U.S. government, will be wiped out.
The U.S. Treasury had received preferred stock in CIT for a $2.33 billion investment in the company through the Troubled Asset Relief Program. This represents one of the first losses of taxpayer money through investments made under that program.
One of the first recognized losses. It won’t be the last.