CIT may emerge from Chapter 11 tomorrow

-- Home Textiles Today, 12/9/2009 10:46:00 AM

New York — Industry lender CIT Group, which filed a prepackaged chapter 11 bankruptcy reorganization plan last month, may emerge from bankruptcy tomorrow.

The company said yesterday that its reorganization plan was approved by the United States Bankruptcy Court for the Southern District of New York.

CIT Group filed for protection in November in an effort to wipe away billions of dollars of debt after bondholders rejected an alternative debt-swap offer. In its Chapter 11 petition, the company listed $71 billion in assets and $64.9 billion in liabilities.

Under the prepackaged plan, all of CIT's common and preferred stock will be cancelled when it emerges and new common stock will be issued, to be traded on the New York Stock Exchange.

None of CIT's operating subsidiaries were involved in the prepackaged filing, including its factoring division which services the furniture industry.

The plan reduces the company's debt by about $10.5 billion, defers debt maturities for three years, and enhances its capital ratios, CIT said.

"CIT now has a stronger capital structure and improved liquidity profile. Our board of directors and management team now have the time and flexibility to execute the balance of CIT's restructuring strategy," Jeffrey Peek, chairman and CEO, said in a press release.

The company said it is continuing to search for a new CEO. Peek announced earlier this year that he would resign Dec. 31.

CIT also said that when it emerges from bankruptcy, it will commit $500 million to fund loans to Small Business Administration lending programs and $1 billion to its vendor financing unit, in addition to a previously announced $1 billion for its Trade Finance unit.

CIT Group lost access to certain commercial paper markets because of credit downgrades in 2008. That led it to draw down several revolving credit facilities, which eventually led to the bankruptcy filing.

By Heath Combs of HTT sister publication Furniture Today.