After the federal government denied Manhattan-based small-business lender CIT Group extra TARP funds and JPMorgan shied away from a deal offering it a $2 billion credit line last week, the lenders' bondholders have stepped up and agreed to extend the company a $3 billion credit line in order to keep it from having to file bankruptcy, The Wall Street Journal reported today. The deal they've worked out strikes us as akin to a subprime-mortgage loan. Not only are bondholders charging extremely high interest rates, but the credit line comes attached with a ticking clock: On top of this new debt they're creating, CIT has $1 billion in debt that comes due in August. Which means CEO Jeffrey Peek, who will stay on under the deal, has less than two months to restructure the company, sell off assets, and generally do all of the things he's supposed to have been doing for the past year or so.
Meanwhile, unemployment continues to grow and retail sales continue to suffer and businesses continue to default on their loans left and right. But don't worry, we're sure Peek has something up his sleeve; he's a real ideas man. Regarding CIT's recent pleas with the government for a bailout, a senior Obama administration official told the Journal Saturday that "Their Plan A was: Seek assistance from the government. And their Plan B was: Ask again."
Ugh. If this company were a person, we feel doctors would diagnose it as being in a persistent vegetative state.