CIT's Efforts to Improve Liquidity Could Put Apparel Makers in a Credit Crunch
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.
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.”
According to the Wall Street Journal, CIT is considering filing bankruptcy.The commercial lender, 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;
According to the Journal, talks between CIT and regulators are still ongoing. The article furter states that “government officials are considering a package including a regulatory waiver that could make it easier for CIT to pass assets from its parent company to its bank division and a separate way to borrow from various government programs.”
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
