Nov. 1, 2009 (United Press International) -- CIT Group Inc. (NYSE:CIT) filed Sunday for bankruptcy protection, a move analysts said could cost U.S. cost taxpayers $2.3 billion.
CIT, a major source of credit for small and mid-size businesses, said in a statement it hoped to reduce its unsecured debt from about $30 billion to about $20 billion by using a "prepackaged" bankruptcy process, The Washington Post reported. The process would allow the 101-year-old company to emerge from Chapter 11 bankruptcy by the end of 2009, the newspaper said.
By filing one of the largest bankruptcies in U.S. history, CIT became the first firm to fail after being bailed out by Washington in 2008, the Post said.
The plan calls for CIT bondholders to recover 70 cents on the dollar but the U.S. government would recover nothing because bondholders would receive new notes and equity while Washington's $2.3 billion investment in CIT was in the form of preferred shares.
CIT lends to about 1 million companies.
"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," CIT Chairman and Chief Executive Officer Jeffrey M. Peek said in a statement.
CIT will be controlled by debt-holders after the reorganization, the Post said.
