In the midst of its restructuring, CIT (CIT) has sensibly decided to delay its quarterly earning. There’s no point in going through all that nonsense (it says it’s going to lose $1.5 billion; everyone knows it’s in rough shape) when it’s got other, more pressing matters to take care of.
The fact of the matter is that a bankruptcy still looks like the most likely option for the company, as Forbes lays out.
… A successful tender offer for the notes maturing Aug. 17 may keep CIT (CIT) from defaulting on the $1 billion in bonds, but credit analysts say the lender still looks like a strong candidate for bankruptcy. It has another $10 billion in debt it must pay off through next year, $872 million of which is due in November, according to estimates from debt researchers at CreditSights. Without the ability to borrow in credit markets and lend the proceeds to small businesses, CIT’s funding model is effectively broken.
So what’s the likely endgame
The next step, credit analysts say, is probably a prepackaged bankruptcy, a reorganization plan drawn up by a company and its creditors. One scenario would give cash to CIT senior unsecured bondholders from selling CIT’s assets, as well as equity in the new company. The secured lenders would remain in place. Current shareholders, including the Treasury Department and its $2.3 billion in preferred shares, would get wiped out.
In the meantime, those likely-to-be-wiped-out-shares are trading at $1.48, after having rallied 116% last week.
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