Shares of CIT Group Inc. (NYSE:CIT) soared in Europe on Tuesday on reports that the New York corporate lender was ramping up its discussions with regulators on guaranteeing a bond issue before existing debt comes due.
The company's shares trading in Germany rose 21.5% to €1.20 ($1.68) at 9 a.m. ET, while the stock advanced in New York morning trading. CIT shares on the New York Stock Exchange on Monday closed down 18 cents, or 11.8%, to $1.35 on fears that the company may soon enter a liquidity crisis. The shares were up over 10% late Tuesday morning.
CIT has about $1 billion in bonds due next month and $10 billion by the end of next year. But it is unable to issue new paper without a government guarantee because of worries about its creditworthiness.
The lender said on Monday it was in talks with the Federal Deposit Insurance Corp. about several measures to improve liquidity, including obtaining a guarantee under the Temporary Liquidity Guarantee Program.
The company said nothing new on Tuesday, but The Wall Street Journal said CIT may get government aid. Bloomberg reported that it was now in "active talks" indicating that the discussions had moved into a more critical stage and could result in some form of aid.
Previously, Bloomberg had reported that CIT had prepared an internal document revealing that its demise would put 760 manufacturers at risk and bring about a crisis for as many as 300,000 retailers. - Peter Moreira
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