NEW YORK (
now looks more likely than ever to file for bankruptcy following a $6 billion loan offer from financier Carl Icahn.
As Icahn made clear in his exclusive interview with
Monday, he doesn't want the company spending more money. In other words, he wants to keep CIT afloat long enough to collect on as many of its outstanding loans as he can, and then wind down the company.
Icahn also pointed out in a letter to CIT's board that he is the company's largest lender. That means his refusal to go along with either a proposed debt exchange or prepackaged bankruptcy plan will account for a big chunk of the votes. On top of that, Icahn says other large bondholders he has spoken with are likely to reject the plan.
Another powerful party that appears to have an incentive to see CIT fail -- or at least would not appear to mind terribly if it did -- is
. As the
reported earlier this month, the investment bank will make a tidy $1 billion profit if CIT fails.
Icahn doesn't sound like he's interested in trying to revive CIT's lending business. Many people thought its factoring business, where CIT takes over receivables from retailers, was highly valuable. CIT describes it on its Web site as one of the largest in the world, but Icahn describes it in his interview with
as "little" and "sort of melting away."
In other words, rebuilding CIT, as far as Icahn sees it, is just more money going out the door that is owed to him. That is bad news for companies that borrow from CIT, though it is good for CIT competitors like
Certainly it is bad news for CIT shareholders. Why CIT shares rose more than 8% Monday on the news of Icahn's offer is a mystery. Icahn may be a friend to shareholders when he's buying a company's shares, but in the case of CIT he is very obviously on the other side of the table.
Written by Dan Freed in New York