How many times can one of the world’s worst-managed and toxic-laden companies be on the verge of bankruptcy? As long as Obama is president, one could answer “in perpetuity” although CIT may finally be on its last breath. The WSJ is out with this stunner:
The fate of CIT Group Inc. was hanging in the balance Tuesday as the large commercial lender readied a plan that would likely hand control of the company to its bondholders.
CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in outstanding debt, said a person familiar with the matter.
For the uninitiated, a debt-for-equity means the old equity is worth zip. Nada. That won’t, however, stop it from trading up to $1,000 before the HFT algos decide they need to move and suck the liquidity rebates out of some other bankrupt deranged monster of a company.
The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured company. The new debt would mature later than current debt, the impending maturity of which has posed a problem for CIT.
If not enough bondholders agreed to the plan, the company could seek to execute the restructuring in bankruptcy court, the person said. The result could potentially be one of the largest Chapter 11 bankruptcy-court filings in U.S. history…
continue on ZeroHedge
And the promised Cramer show:
Citi and CIT Are Primed for Upside, by Jim Cramer, 9/29/2009, 1:54 PM EDT
Citigroup’s on the move, so is CIT . I think that Citigroup will be the biggest beneficiary of the new plan to buy toxic assets, because it is basically running its SIV as discontinued operations and it could benefit from the new program. CIT is about the possible IndyMac link-up courtesy of John Paulson, a real smart guy who was negative about mortgages before it paid to be negative. Dan Freed on CIT CIT Surges on Report of IndyMac Deal I put both of these up there as examples of companies that won’t die, and because they won’t die, they live. I know that seems a little circular in reasoning, but because Citigroup never suffered a run like Wachovia and Washington Mutual did, it made it and as our flagship site mentioned, it is safe. If it is safe, it can go higher. Because no one forced CIT into bankruptcy, it can live to play again, and when I read in the New York Post that Paulson owns CIT debt, I realized that he’s powerful enough to save this company, particularly because he is one of the investors in IndyMac and knows his way around the bottom of the debt barrel. These two stocks represent lottery tickets that are no longer rip-ups because they have made it out of the “critical care” stage and are recovering. I would buy them both.
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