Are 10,000,000 Jobs At RISK?????
The company is running out of time as its liquidity erodes quickly. If it could secure the private financing, CIT believes it could then buy enough time to pursue debt for equity swaps on some of its debt and have its capital structure properly aligned to prevent any future liquifty concerns.
Meanwhile, CIT's bonds with short term maturities have sold off from 90 cents on the dollar late yesterday to 60 cents Thursday.
"This comes as a surprise as we had thought CIT had a good chance of obtaining support," analysts at brokerage Stifel Nicolaus said in a research note. "With these talks ending fruitlessly, we think CIT likely was too stressed for any temporary government solution."
CIT is the key lender to 300,000 retailers and about one million small to midsize businesses. Assuming that each of its borrowers employ 10 people, it appears that 10,000,000 jobs could be affected by a CIT bankruptcy.
CIT is in trouble becuase many of its borrowers are unable to service the debt any longer. This would be consistent with a number of small businesses I survey. You would be amazed how many small business owners and independent contractors have been forced to max out credit cards simply to keep the doors open.
Based on an unwillingness to help, it appears that the stress at the small/midsize business level is simply too severe for the government to try to bail out.
If CIT actually does file for bankruptcy, and cuts off credit lines, thousands of businesses will likely not be able to obtain alternative financing due to the current environment and the ripple effect could be enormous...not only to those businesses, but to their vendors and landlords as well.
As the press and Wall Street are talking green shoots, we could see millions of families' livlihoods shot down the drain.