If you’ve never heard of CIT Group, now may be a good time to correct that. The US firm is the third-biggest aircraft financier, the third-largest railcar leaser and its $76bn loan book provides funding to one million businesses. And it’s in very serious trouble. CIT needs to raise $10bn by March 2010 to pay off maturing debt, yet its credit rating has been slashed to CCC, meaning it can’t access the credit markets without a government guarantee.
What the commentators said
CIT is “on the wrong side of the velvet rope” as the Federal Deposit Insurance Corporation (FDIC) plays bouncer, said Lex in the FT. The FDIC has agreed to guarantee debt for peers such as GE Capital and GMAC, but is refusing CIT’s pleas. The firm’s problem is that it isn’t big and reckless enough to be certain of a government bail-out, said Robert Cyran on Breakingviews.
Sure, it “finances everything from Dunkin Donuts franchises to day care centres [and] many of them might have to pay more to refinance their debt or even go under”. But it doesn’t have the political position of GMAC – the major lender to GM and Chrysler vehicle buyers – and its loan book is one-eighth the size of GE Capital.
That said, the government is still worried about unforeseen consequences of CIT collapsing, said Damian Paletta and Serena Ng in The Wall Street Journal. Talks are continuing. But the FDIC remains reluctant to guarantee it and it’s still unclear whether a deal can be agreed.