Snap-on terminates CIT financing venture

KENOSHA, Wis. - Power tool and vehicle equipment maker Snap-on Inc. has terminated its joint venture with troubled commercial lender CIT Group Inc., and will buy out CIT's stake for about $8.2 million.

CIT's bondholders scrambled to find an 11th-hour solution Thursday that would keep the small business lender out of bankruptcy after the government refused to turn over bailout funds. CIT said it continues to negotiate with potential lenders in an effort to shore up its cash position.

Snap-on said late Thursday that it notified CIT of its action regarding the companies' Snap-on Credit LLC venture, which provides financing to Snap-on's U.S. franchisees and customers. The joint venture was established in 1999 and CIT has been the exclusive purchaser of the financing contracts originated by Snap-on Credit.

Snap-on said it has been in ongoing talks with CIT regarding a longer-term new joint venture agreement, and will continue these discussions. If CIT is able to resolve its liquidity issues long-term, Snap-on said it may sign a new deal with CIT.

Snap-on Credit will continue to service the existing portfolio of contracts owned by CIT, which has a balance of $834 million. Snap-on said it has no obligation to purchase this portfolio.

The company said operations won't be interrupted and customers and franchisees will be able to obtain financing and credit without change. All new contracts will be financed by Snap-on Inc. The company expects new contracts to require about $450 million in financing over the next 12 months, and said it believes it has adequate resources to fully provide that funding.

The company added that it will continue to pay its regular quarterly cash dividend of 30 cents per share.

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