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November 2nd, 2009
03:32 PM ET

Financial Dispatch: Lender CIT files for bankruptcy

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Andrew Torgan
CNN Financial News Producer

CIT Group, one of the nation's leading funders of small and medium-sized businesses, filed for the fifth-largest bankruptcy by assets in U.S. history over the weekend as part of a reorganization plan that has the support of a majority of its debt holders.

Not to be confused with Citigroup, CIT is seeking quick approval of the prepackaged plan in bankruptcy court and said none of its operating subsidiaries would be affected by the filing, allowing them to continue operations.

In the bankruptcy filing, CIT said it had $71 billion in assets and $64.9 billion in liabilities. Only Lehman Brothers, Washington Mutual, WorldCom and General Motors had more in assets when they filed for protection.

CIT's position in the business world is crucial: it’s a top lender to women and minorities and it says it is the leading provider of “factoring,” a key element in the day-to-day financing of the retail industry. It’s also the nation's third-largest lessor of rail cars and the world's third-largest lessor of aircraft.

One company that did not seek bankruptcy protection this year or take any government bailout money was Ford Motor.

And today, Ford reported a surprise profit of just under $1 billion for the third quarter - helped by a bump in sales from the government’s “Cash for Clunkers” program, a reduced cost structure and problems at its rivals Chrysler and General Motors.

Ford said cost cutting during the past year and an improved outlook for sales leads the company to believe it will be "solidly profitable" in 2011 - the most bullish outlook Ford has offered investors since it started losing money in 2005.

Ford, along with the rest of the auto industry, reports sales figures for October tomorrow. And the post-clunkers hangover is expected to continue.

It’s also a very busy day on the housing and economic fronts.

The number of signed sales contracts to buy homes rose for the eighth straight month in September.

The National Association of Realtors said its September Pending Home Sales Index spiked 6.1% to the highest level since December 2006 as people rushed to take advantage of an $8,000 tax credit for first-time homebuyers.

It's estimated that between 200,000 and 400,000 additional sales will have been made because of that incentive. The credit lapses at the end of this month, and the housing industry is bracing for a major turndown in sales if Congress fails to pass some kind of extension.

Meanwhile, a key index of manufacturing activity jumped in October, reaching its highest level in three and a-half years.

The Institute for Supply Management's manufacturing index rose to a reading of 55.7 in October from 52.6 the month before. It was the highest reading since April 2006 when the index registered 56.

The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing field. Readings above 50 indicate growth, while levels below 50 signal contraction. Readings below 41.2 are associated with a recession in the broader economy.

The index first showed growth back in August after 18 months of contraction. It dipped slightly in September from the previous month, but has held above the level indicating growth for three months in a row.

And construction spending also rose in September as the increase in housing starts over the last few months has finally shown up in the residential construction numbers.

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Filed under: 360° Radar • Andrew Torgan • Economy • Finance
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