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An Alabama hardware supplier has blamed financial woes at U.S. lender CIT Group for its bankruptcy filing, in an early sign of the effect a potential CIT bankruptcy could have on millions of small U.S. businesses.
In court documents filed in U.S. bankruptcy court in Birmingham on Friday, Moore-Handley said it was forced to seek bankruptcy protection "due to difficulties accessing funds" under their financing arrangements with CIT [CIT
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The company said it had been negotiating its own strategic plan with CIT but that "the federal government's recent decision not to support CIT's reorganization has thrown CIT into disarray and casts substantial doubt on CIT's ability to continue to fund (Moore-Handley's) working capital requirements."
The company, which says it is the second largest independent hardware and building materials distributor in the United States, said in court papers that it owes about $17.5 million to CIT.
CIT, which services nearly one million small- and mid-sized businesses, has been in talks with a group of bondholders to seek $2 billion to $3 billion in rescue financing as it tries to avoid its own bankruptcy filing, a source close to the company said on Friday.
The impact of CIT's demise would likely pale by comparison with the collapse of investment bank Lehman Brothers last September, analysts have said. But the ripples of the lender's collapse could be widespread, hurting already struggling small businesses such as arts organizations and retailers.
Moore-Handley, which was founded in 1882 according to its Web site, said it had net sales of $145.5 million in 2008, and expected a 20 percent decline in that figure for 2009 as residential construction activity in the Southeast declined.
The case is In re: Moore-Handley Inc, U.S. Bankruptcy Court, Northern District of Alabama, No. 09-04198.
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