CIT and Capmark Financial 'heading for bankruptcy'

13 October 2009

CIT Group and Capmark Financial Group are both dangerously close to bankruptcy, according to media reports.

Lender CIT has been trying to raise capital through a debt swap but there has been little interest from investors.

Two unnamed sources told Reuters that the failure of the move was likely to mean CIT would now attempt a pre-packaged bankruptcy.

But it is believed this may not receive enough support from debt-holders and CIT may have to settle for a pre-negotiated bankruptcy instead.

Last week it was reported that Goldman Sachs stands to earn $1 billion if CIT goes bankrupt, under the terms of the $3 billion rescue package it agreed with CIT in 2008.

Meanwhile, commercial real estate company Capmark Financial may go bankrupt by the end of the week, according to an unnamed source speaking to Reuters.

The company admitted last month that it may file for Chapter 11 bankruptcy after it made a second quarter loss of $1.62 billion.

Capmark's creditor group, which includes more than 50 banks and more than 50 hedge funds, is said to be negotiating for a pre-arranged bankruptcy.

By Gary Cooper

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