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CIT: Suspending Dividends as Turbulence Continues

August 10, 2009
CIT: Front door on 5th Avenue in New York

CIT: Front door on 5th Avenue in New York

Troubled financing company and bank CIT has suspended Dividends to its preferred bondholders, in another move to shore up and funnel cash to the needed outlets as it continues its restructure and tries to avoid a collapse it cannot control. If CIT can control their reorganization, it may allow the company to reduce approximately $7 billion of unsecured debt that comes due at the end of June, 2010.  According to this article in the New York Times:

CIT said it had met the 58 percent participation rate for holders of its Aug. 17 notes, a figure that was lowered on Monday from the originally announced 90 percent requirement. The amendment was made with the consent of CIT’s lenders, who have provided $3 billion in financing.

The move to hold on to dividends is not a sign of anything more than financial responsibility. The company cannot pay off shareholders mere days after it is offering bond holders 82.5% – 87% of the value of their notes. Nor can it pay shareholders when there is much debt outstanding and the company just received emergency funding to manage the most urgent of short-term debts and company expenses.

What does this mean for factoring clients in the garment industry?  The situation and company trajectory remains the same. All this news means they aren’t paying shareholders so they can put every possible dollar to the situation at hand.


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