According to The Wall Street Journal, CIT (NYSE:CIT) will file for Chapter 11 today. Bondholders will probably provide $4.5 billion in financing for a prepackaged bankruptcy. Senior creditors will likely get $.70 on $1. Carl Icahn, who offered that company $1 billion in financing, may be left out in the cold because CIT may not need the capital he has offered.
Taxpayers are likely to see their $2.3 billion investment in the firm go to zero.
The group that will lose the most money that fastest are the investors who have bought CIT shares over the last several weeks, betting the company would not have to go to court. Shares traded at $2.20 on September 29. On October 19, CIT traded at $1.21. Investing in CIT was a long shot and investors who put their capital into the stock are likely to watch the shares fall to a few pennies tomorrow morning.
Douglas A. McIntyre