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CIT Finds Funding (For A Few Weeks Anyway)

July 20, 2009

The ongoing CIT funding saga seems to have taken a relatively positive turn last night, as CIT found funding that can keep it afloat and continue supporting the clothing industry (among others) for another extended period.  While we will be writing more about what the CIT situation is about, how Factoring works (Factoring is the financing strategy relied on by the industry) and other things you never thought you’d need to know. Right now, what’s important to know is that business can keep functioning for the next few weeks at least.  The industry, as we know it, has been given a lifeline. The cost of that lifeline is a steep 10.5% according to this article in the Wall Street Journal and the one mentioned below.

On the news, Marketwatch is reporting that stocks in the retail sector are up today:

The S&P Retail Index (RLX 342.24, +6.70, +2.00%) rose 0.5% to 337.18…Among the gainers, shares of Macy’s Inc.  rose 3.5%. J.C. Penney Co. traded up 2.3% and both Kohl’s Corp. and Nordstrom Inc. added 1%.

MRKetplace magazine, the benchmark menswear industry publication is also keeping tabs on the story, their most recent coverage is here.

This is, however, not the end of the story, or CIT’s problems.  According to MICHAEL J. de la MERCED‘s New York Times article, CIT Is Said To Obtain Urgent Loan To Prevent Bankruptcy:

It remains unclear whether CIT’s long-sought lifeline will be enough to give it the room to make crucial changes to its business at a time when it is unable to obtain financing from the capital markets. While it maintains a bank subsidiary in Utah, the company has traditionally relied on money that it borrows in the capital markets to make loans to its customers.

Once the credit markets froze and investors became leery of CIT’s loan portfolio, the company was in peril.

Were CIT to fail, the company — with $75 billion in assets — would become the largest casualty in the finance sector since Lehman Brothers collapsed last fall. Since then, federal regulators have been pumping billions of dollars into numerous banks across the country to prop them up and create some stability in the financial system.


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