Uncle Sam may not open his wallet via the Temporary Liquidity Guarantee Program to CIT Group Inc. (NYSE:CIT). And that could spell trouble for the commercial lender, which owes more than $10 billion of maturing debt through 2010 and could force the newly converted bank to raise capital through a possible stock offering to convince the government to give it the needed funds.
A source told Bloomberg that the government is unwilling to allow CIT to participate because it doesn't want to risk the taxpayers' money. Translation: CIT may not pay its debt on time or if at all. Fitch Ratings' junk credit rating on CIT's debt is a testament to the bank's financial straits. The agency says the consequence of not receiving government money is a possible default in April, when a $2.1 billion credit line matures.
Should CIT fall into bankruptcy, the failure would be the biggest bank collapse since regulators acquired Washington Mutual Inc. in September. - Gerald Magpily
