CIT Discussing Government Aid
CIT Group Inc., the largest factor to the apparel industry, is looking into several avenues to improve liquidity—a move that has industry watchers nervous about the potential impact on a large swath of fashion companies.
CIT funds more than a million businesses—many of which are small or mid-sized companies, including many in the apparel industry.
After news of the commercial lender’s problems broke on July 12—including a Wall Street Journal Report that the company had hired attorneys to explore a possible bankruptcy filing—many companies drew down their lines of credit.
Any disruption in CIT’s business could have far-reaching impact on the apparel business. According to some in the industry, CIT was able to leverage its market penetration to offer lower financing terms than more-conservative lenders.
The Journal reports that CIT and federal regulators have been working on an aid package that would allow the company to remain afloat.
The company has applied for FDIC’s Temporary Liquidity Guarantee Program and is “is also actively discussing liquidity solutions that do not involve access to the TLGP program,” according to a statement released on July 12. Among the possible solutions CIT is pursuing are a “near-term transfer of assets into CIT Bank through Section 23A waivers and the transfer of its vendor finance and trade finance businesses into CIT Bank.”
CIT, however, is non-committal about the outcome or timeline of its efforts to bolster liquidity, noting, in a statement that, “there can be no assurance that any of CIT’s discussions with the government will result in any regulatory action nor as to the timing or terms of any such approvals.quot;
In late 2008, the Federal Reserve approved CIT’s application to become a bank holding company, which qualified CIT to apply for federal bailout money. In late December, the company received $2.33 billion in TARP (Trouble Asset Relief Program) funds from the U.S. Treasury. —Alison A. Nieder
