Video Debate: What Will Happen to CIT?
A bankruptcy filing for CIT Group is likely, sources have told CNBC, but the debate on whether CIT should receive a government bailout or be allowed to fail is still up for discussion by many CEOs and financial analysts.
CIT Failure Would Be Catastrophic:
"If CIT were to go under, I would be concerned for a [small business] that only uses CIT. They’re invoicing every day, they’re turning the invoice over to CIT, and then they get the money right away. That’s the money that they use for their entire cash flow for their company. If you turn [invoices] over to CIT and they can’t pay you because they don’t have cash, and you’re getting ready to make payroll or a payable … you can’t make that payroll." - Bew White, president and CEO, Summer Classics
Analyst Dismisses Likelihood of a CIT Downfall:
"Don’t be so sure that CIT is down and out. There [are] a lot of moving parts there, but secondly even if they are going to [fail] they will be able to handle it ... Until CIT moves to bankruptcy, things are still in the air. I think it's probably not in the best interest of the system to fail, [but] even if CIT were to fail it won’t be as bad as it was six months ago." - Analyst Jeffery Harte, Sandler O'Neill
Private Equity to the Rescue?
"CIT is seeking to line up $2-$3 billion in unsecured financing from private equity firms and fixed income firms over the next day, a source close to CNBC said. If CIT could secure the private financing and the 23A approvals, CIT believes that it could buy enough time to pursue debt for equity swaps on some of its bonds and have its capital structure properly aligned to prevent any future liquidity concerns. In another words it would avoid Chapter 11." - David Faber, CNBC Anchor and Reporter.
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