Bankruptcy of CIT Adds to Uncertainty in Industry

Washington, DC, Nov. 2, 2009--The bankruptcy of CIT Group, a key lender that helps retailers stock their shelves, is complicating matters for the industry ahead of the holiday shopping season.

CIT Group Inc. filed for Chapter 11 bankruptcy protection Sunday in New York after months of struggling to avoid collapse. The company provides badly needed credit to thousands of small and mid-sized businesses, and is a critical part of the flow of capital in the retail sector.

CIT stressed that its lending operations will continue to operate as it proceeds through bankruptcy with the hope of shedding $10 billion in debt.

Chairman and CEO Jeffrey M. Peek said the company's prepackaged reorganization plan "will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy."

But retail groups and analysts warn that the case will likely add to the instability in the retail sector. CIT is an important source of capital, working with 2,000 vendors that supply merchandise to more than 300,000 stores.

CIT expects to emerge from bankruptcy by the end of the year.

Ever since CIT's troubles flared up last summer, the retail industry has carefully monitored the lender, with many vendors scrambling to find alternative financing at rivals like Rosenthal & Rosenthal. But finding a replacement hasn't been easy because competitors can only take on so many more clients.