Commercial lender CIT Group posts Q3 loss of US$1.07B as its cash crunch worsened ahead of its Nov. 1 bankruptcy filing
November 17, 2009
– Commercial lender CIT Group Inc. says it lost $1.07 billion during the third quarter as its cash crunch worsened ahead of filing for bankruptcy protection earlier this month.
One of the nation's largest lenders to small and mid-sized businesses, CIT Group filed for bankruptcy protection Nov. 1 as it was unable to get bondholder approval to reduce its mounting debt. Even as bondholders turned down an offer to swap their debt for new debt with a later maturity and stock, they supported a plan for a preapproved bankruptcy filing.
That plan is aimed at getting CIT Group reorganized under bankruptcy protection and emerging from court protection by the end of the year.
CIT, based in New York, said in a regulatory filing late Monday that it lost $2.74 a share during the quarter ended Sept. 30. It lost $317.3 million, or $1.11 per share, in the same period a year ago.
CIT was hit hard by the credit crisis as its costs to borrow money outpaced revenue generated from providing loans. Its access to its primary funding source, a short-term lending market known as the commercial paper, essentially evaporated during the credit crisis last year and has yet to recover.
CIT generated $549.6 million from interest and fees on loans it originated during the third quarter, a 36 percent decline from the same quarter last year. The drop came as CIT struggled throughout the summer to try and reduce its debt and restructure its business without filing for bankrupty protection.
While CIT was able to reduce interest on its own borrowings during the quarter, that decline could not keep up with the drop in money generated from loans it originated. CIT's interest expense fell 9 percent to $693.8 million.
At the same time, CIT's provision for credit losses ballooned to $701.8 million from $210.3 million during the third quarter in 2008 as more customers fell behind on repaying their loans amid the recession.
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