New York: The century-old American lender CIT Group has filed for bankruptcy, the fifth largest in the country`s corporate history by assets at USD 71 billion.
CIT, which finances small and middle market businesses,
has sought bankruptcy protection after the failure of its
planned debt-exchange offer with bond holders.
The bankruptcy, which reflects the continuing credit woes
in the US economy, is the largest following that of Lehman
Brothers, Washington Mutual, Worldcom and General Motors.
Going by estimates, only four entities had more assets than
CIT, when they went bankrupt.
According to the court filing, CIT had total assets worth
USD 71 billion while the liabilities stood at USD 64.9
billion, as on June 30, 2009.
At the time of bankruptcy, Lehman had assets to the tune
of USD 691 billion, Washington Mutual (USD 328 billion), World
Com (USD 104 billion) and General Motors (USD 91 billion).
Interestingly, four of the five bankruptcies — Lehman,
Washington Mutual, General Motors and CIT — have happened in
the wake of the financial meltdown.
In a statement on Sunday, CIT said the company and one of
its subsidiary, has filed for "prepackaged" reorganisation
with support of its debt holders and Board`s approval.
Following the reorganisation, the company expects to
lower its debt by about USD 10 billion.
To tide over the financial meltdown, the US had pumped in
billions of dollars into CIT.
"None of CIT`s operating subsidiaries, including CIT
Bank, a Utah state bank, will be included in the filings. As a
result, all operating entities are expected to continue normal
operations during the pendency of the cases," CIT noted.
CIT`s Chairman and CEO Jeffrey M Peek said the decision
to proceed with the re-organisation would allow the company to
continue to provide funding to small business and middle
Last month, CIT received credit line worth USD 4.5 billion
from a diverse group of lenders. Separately, it had entered
into an agreement with billionaire-investor and major bond
holder Carl Icahn, whereby the company would be getting USD
1 billion credit line.
Founded in 1908, CIT operates in more than 50 countries.