California Apparel News

Near the close of business on July 17, Bloomberg reported that CIT Group Inc. was meeting with advisors, including JPMorgan Chase & Co. and Morgan Stanley, which as reportedly talking to other banks about securing debtor in possession funding if CIT does file bankruptcy. According to the Bloomberg story, CIT and its advisers are also looking for other alternatives to bankruptcy, including arranging “rescue financing.”

CIT’s clients, which include many small and mid-sized apparel businesses are anxiously awaiting news of CIT’s fate. The lender is the largest factor in the apparel business, with some estimating it holds 60 percent of the market. CIT’s attempts to negotiate for government assistance have been fruitless and many in the industry see a bankruptcy as inevitable unless a last-minute deal can be reached with federal regulators or a “white knight” buyer.

If CIT could secure debtor in possession (DIP) funding, that could be a relief for many in the apparel industry, who are nervously watching the CIT story unfold. “If CIT has DIP financing, it could be business as usual,” said attorney Mark D. Brutzkus, with Ezra, Brutzkus Gubner LLP in Woodland Hills, Calif.

The industry continued to urge the government to reconsider its position on CIT. The American Apparel & Footwear Association, along with more than 30 trade associations, sent a letter to Treasury Secretary Timothy Geithner stressing CIT’s impact on small and medium-sized businesses.

The associations represent “the full spectrum of the textile and apparel supply chain” from providers of raw material to designers and retailers. In addition to the AAFA, the California Fashion Association, the Council of Fashion Designers of America, the National Council of Textile Organizations, the National Retail Federation and the U.S. Association of Importers of Textiles and Apparel are among the signatories to the letter.

“Uncertainties over CIT have already provoked a credit squeeze that threatens payments and payrolls in thousands of businesses,” the letter reads. quot;[I]f CIT is forced to undertake a bankruptcy filing, the ripple effect will be felt in every city and state across this country as the further tightening of credit markets will make it incredibly difficult, if not impossible, for many of the companies who currently rely on CIT for financing to remain in business. The number of jobs that depend on the successful outcome of the CIT crisis is immeasurable.”

ApparelNews.net will continue to cover the CIT story as it develops. For complete coverage of the story, go here.