CIT Group's Bankruptcy Plan: Goodbye Common and Preferred Stock

| About: CIT Group (CIT)

On Sunday, CIT Group (NYSE:CIT) filed for bankruptcy protection with nearly 90% of its debt holders voting in favor of the agreement. The key provisions of the agreement are:

  • Emergence sought by year-end
  • Operating entities remain unaffected and highly liquid
  • Continue lending to small and middle market businesses
  • "Under the proposed prepackaged plan of reorganization, all existing common and preferred stock will be cancelled upon emergence"
Bondholders will get about $0.70 on the dollar plus new common stock while current shareholder will probably get nothing .

Bloomberg reported: "The U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout."

CIT had been trading with hopes shareholders would not be wiped out. I want to make sure all my readers view the CIT Bankruptcy Press Release so you understand that the currently trading shares are worthless:

"Under the proposed prepackaged plan of reorganization, all existing common and preferred stock will be cancelled upon emergence"


This bankruptcy is not a surprise, but taxpayers will probably lose the $2.33 billion we invested in the company.

CIT hopes to emerge from bankruptcy in 60 days.

Disclosure: I have no position in CIT in either my personal account or my newsletter portfolios.