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Kirk Lindstrom has an engineering degree from the University of California, Berkeley. Following 20 years of research and development as a scientist and engineer at Hewlett Packard, Kirk turned his attention to investments where he edits "Kirk Lindstrom's Investment Letter," that... More
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  • CIT Group Bankruptcy Agreement Will Cancel Common & Preferred Stock  0 comments
    Nov 2, 2009 09:35 AM | about stocks: CIT
    This article was originally posted at Kirk's Market Thoughts as CIT Group Bankruptcy Agreement; Common & Preferred Stock Canceled.

    Yesterday CIT Group filed for bankruptcy protection with nearly 90% of their 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.


    Click image for full size graph courtesy of stockcharts.com

    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." (Bloomberg Story)

    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"

    Click image for full size graph courtesy of stockcharts.com

    This bankruptcy is not a surprise but taxpayers will probably lose the $2.33B 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.


    Stocks: CIT
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