CIT expected to report $1.5 billion loss, bankruptcy filing urged


CIT Group (CIT), which lost $3 billion in the last eight quarters, is expected to announce a $1.5 billion loss for the second quarter today. Few expect CIT to be able to avoid bankruptcy.

Advisors to CIT bondholders, who recently bailed out CIT with a $3 billion loan, think creditors should push CIT into Chapter 11 bankruptcy after an August debt swap, according to a report from Bloomberg. Advisors recommend that CIT restructure its debt in a "pre-packaged bankruptcy," even if the debt swap is successful." A prepackaged bankruptcy shows the world they have a solution to their problems," Martin Bienenstock of Dewey & LeBoeuf told Bloomberg. "An open-ended bankruptcy creates uncertainty as to whether the company will survive or will liquidate."

CIT reported earlier this week that it does not have enough liquidity to repay the $1 billion of floating-rate notes maturing August 17 and has asked holders of the August notes to swap their claims for 82.5 cents on the dollar. Upon completion of the offer, Fitch indicated that it would downgrade CIT's long-term issuer default rating to "RD" from "C." Fitch considers the purchase a coercive debt exchange.