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As fast as CIT Group Inc. (NYSE:CIT) is attempting to raise money to keep its struggling finance company afloat, rating agencies seem to be downgrading its debt. Standard &Poor's lowered its long- and short-term debt rating on CIT last week to junk status of BB-/B from BBB-/A-3. The ratings were placed on S&P's CreditWatch negative list, meaning the rating agency could do another downgrade if CIT's situation worsens in the near future. But it's not just S&P that's downgraded CIT to junk; rival agencies Fitch Ratings and Moody's Investors Service have already done so. With $7.4 billion in debt due in the next 12 months, CIT has looked at several avenues to raise money. Since March 2008, it has actively been seeking buyers for noncore assets, notes The Deal Pipeline (subscription required). While it initially found some interest, sales have dried up. The company sold its home-lending business for $1.5 billion, which includes the assumption of $4.4 billion in debt, to Lone Star Funds in July 2008. Additionally, CIT sold a $470 million manufactured home loan portfolio to Vanderbilt Mortgage and Finance Inc. for $300 million. But this money has been a drop in the bucket to the billions the company needs to repay its debt. Meanwhile, CIT is still waiting for a green light to join the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program. The program would allow it to issue FDIC-backed new debt and help pay down its own debt obligations. "We believe this has reduced CIT's funding flexibility and forced it to increase its reliance on less-attractive funding sources, including secured borrowings and net portfolio run-off," Standard & Poor's credit analyst Rian Pressman wrote in a report last week. The clock is ticking for CIT. Its stock is drowning at around the $3.00 level, and some conclude that the federal guarantee program is its only saving grace. If it doesn't get a green light soon, its future as a going concern seems hazy. After all, who wants to buy a company weighed down with debt that's due immediately? - Gerald Magpily
CategoriesComments
From: Don,
Shouldn't it be "flounders" and not "founders" in the title?
Posted on:
June 15, 2009 4:42 PM
From: Gerald,
Gerald
Posted on:
June 16, 2009 9:24 AM
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THis is a story about Ken Brause's company. Not good