When a company in dire straights hires a bankruptcy specialist such as Skadden Arps Slate Meagher & Flom LLP, does it mean it's filing for Chapter 11? For CIT Group Inc. (NYSE:CIT), apparently not. Media reports surfaced this weekend that CIT has hired Skadden, but the lender to small and medium-sized businesses does not want to elaborate about retaining the law firm.
"Skadden is one of the principal law firms representing CIT," Curt Ritter, a spokesman for New York-based CIT, told Bloomberg via e-mail on Sunday. "They represent the firm (CIT) on a wide variety of corporate matters. CIT will not comment on any specific aspect of their engagement."
But the market will likely see the move as a precursor to a possible bankruptcy filing.
Last week, investors fled CIT as reports surfaced that the company was having trouble receiving capital through the FDIC's Temporary Liquidity Guarantee Program and has $10 billion of maturing debt through 2010.
CIT is reportedly now working with the FDIC on possible strategies to raise capital outside the government and strenghen its balance sheet so it can qualify for the TLGP. The FDIC is concerned that CIT right now is such a liability that giving it money in its current state would likely not be a prudent investment for the taxpayer. - Gerald Magpily
