Business NEWS

Goldman Sachs to get USD 1 bn if CIT Group files for chapter 11 bankruptcy

By Janina Energin for CEOWORLD Magazine Updated:October 5, 2009

If CIT Group (CIT) files to reorganize under Chapter 11 of U.S. bankruptcy law, Goldman Sachs (NYSE:GS) (GS) could receive a $1 billion payment because of the structure of a $3 billion rescue financing that Goldman had arranged for the New York commercial lender, people familiar with the matter told the Financial Times.

U.S. taxpayers, on the other hand, stand to lose $2.3 billion, the value of the CIT preferred shares that the U.S. Treasury purchased, the newspaper reported on Monday. Such a loss for taxpayers would be the biggest so far from the government’s capital plan for the banks, the FT reported. CIT is working to avert a bankruptcy-law filing, aiming for a debt-swap offer that would leave equity holders with little value, the FT reported.

A failure of CIT, run obviously quite incompetently by CEO Jeffrey Peek, would be the biggest bank collapse since regulators seized WaMu, and put hundreds of manufacturing clients in risk of failure while creating a crisis for as many as 300,000 retailers.

The payment would cover fees from a 20-year agreement signed June 6, 2008, according to regulatory filings. Under the deal, CIT agreed to pay Goldman 2.85 percent of the maximum amount lent under the facility, or $85.5 million annually for the first decade and then a declining amount after that, the filings show.

CEOWORLD HIGHLIGHTS:

US Lender CIT Group goes bankrupt files for bankruptcy
US lender CIT Group (NYSE:CIT) has filed for bankruptcy, the fifth largest in the country's corp ...
Pacific Investment Management Co - PIMCO Left CIT Group Bondholder Steering Committee
Pacific Investment Management Co- PIMCO, one of six members of a steering committee of CIT Group ...
Jeffrey M. Peek is stepping down as the CIT Group CEO
Jeffrey M. Peek is stepping down as the CIT Group’s (NYSE:CIT) chief at the end of this year. Th ...
Goldman Sachs in talks to buy Fannie Mae tax credits
Goldman Sachs Group Inc (NYSE: GS) is in talks to buy millions of dollars of tax credits from g ...
CIT Group amends debt exchange offer, Icahn May Become Top CIT Shareholder
Troubled lender CIT Group Inc (CIT.N) has extended and sweetened its debt exchange offer for so ...

Like this article! ‹ Nomura acquires NikkoCiti Trust and Banking Corporation planning to Raise $4.82 Billionfrom a share offering U.S.-led Crown consortium led by Michael Dingman and Shamel Rushwin wants to buy Volvo from Ford, Geely Automotive? ›


Share this Post: Get It Delivered To Your Inbox