CIT Group on Sunday filed for Chapter 11 bankruptcy protection in New York’s Southern District Bankruptcy Court, and on Monday it asked the judge overseeing the case, Allan Gropper, for approval to receive a special loan facility to be used during the court-supervised workout.
The company listed over 100,000 creditors in its bankruptcy filing. Its assets totaled $71 billion, while its liabilities came to nearly $65 billion.
CIT provides financing to small and middle-market companies. The company specializes in factoring and is also the third-largest railcar lessor in the U.S. and the third-largest aircraft lessor in the world.
The bankruptcy comes after numerous attempts by the firm to stay aloft. CIT is the latest casualty of a credit crisis now entering its third year.
As a public company, CIT had nearly 400 million shares of stock which on Friday – the last day of trading for the firm – was changing hands at 76 cents a share. As of Dec. 31, the biggest holders of company stock were FMR LLC (holder of 9.7% of outstanding common stock), Brandes Investment Partners (holder of 9.7% of outstanding common stock) and Franklin Mutual Advisors (holder of 5.7% outstanding common stock).
Skadden Arps Slate Meagher & Flom is serving as debtor counsel.
The largest unsecured creditors included Bank of America, The Bank of New York, Citibank, Goldman Sachs and ABN Amro.
The loan CIT has asked for is a $500 million financing. Bank of America is the administrative agent for the loan and its subsidiary Banc of America Securities is lead arranger and sole bookrunner of the financing.
Bank of America has agreed to provide to CIT and certain non-debtor subsidiaries a new $500 million senior secured credit facility for the issuance of standby and documentary letters of credit, according to court documents. The borrowers intend to use the facility to support obligations and commitments of themselves and their respective subsidiaries.
“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle-market customers, two sectors that remain vitally important to the U.S. economy,” Jeffrey Peek, chairman and chief executive of CIT, said in a prepared statement.
Peek recently announced his intention to quit CIT. His resignation is effective at year-end.
CIT said its board of directors approved the prepackaged bankruptcy plan and some 90% of its debt holders supported the prepackaged plan. The company said some $10 billion of debt will be cut by its bankruptcy.