CIT Gets a New Lease on Life
By Staff -- Gifts and Dec, 7/17/2009 10:40:00 AM
New York – Troubled lender CIT saw its share price more than double today, according to Reuters, after a source close to the company said CIT is in talks with JPMorgan Chase & Co and Goldman Sachs Group Inc. for short-term financing. The deal, if successful, would avert a bankruptcy which BusinessWeek predicted might come as early as today.
CIT is deeply entwined with the US retail supply chain: CIT services about 300,000 retailers and 1,900 manufacturers and importers. In addition to acting as a lender, the company serves as a factor. When small and midsize suppliers ship goods to retailers, factors provide the suppliers money until the retailers pay, which can take 30 to 90 days. Factors also guarantee suppliers that they will get paid, even if a retailer to whom they shipped goes bankrupt. According to the New York Times, CIT is the factor for about 2,000 manufacturers and suppliers whose goods are sold at about 300,000 retailers across the country. About 70 percent of CIT’s retailing clients do less than $50 million in sales, and they serve about 60 percent of the market – too much to be easily picked up by other lenders. If the deal does not go through, retailers and smaller vendors may be left scrambling for cash as they enter the Christmas season.
According to Furniture Today, many in the home furnishings industry, among others, urged the government to bail out CIT, but it declined to do so for the second time in a year: CIT received $2.3 billion in government bailout funds in December 2008.
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