CIT Spells Trouble for Retailers

As one of the largest lifelines of the retail industry, CIT (CIT) -- and its looming bankruptcy -- could well spell trouble for retailers.

"Vendors for every retailer from Wal-Mart ( WMT) to Target ( TGT) to smaller private retailers depend on CIT," Janney Montgomery Scott analyst David Strasser wrote in a research report today.

The diversified lender is currently in talks with its principal regulators on ways to improve its near-term liquidity position, the company said. It is discussing its application to participate in the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, as well as liquidity solutions that don't involve access to the program. CIT said it is in talks for the near-term transfer of assets into CIT Bank through certain waivers and the transfer of its vendor finance and trade finance businesses into CIT Bank.

If approved, these transfers would enhance CIT's liquidity position, the company said in a statement late Sunday.

If the government did not step in, Strasser said the retail industry would face financing and inventory issues.

"We believe that larger companies would find alternative sources of financing, while smaller retailers could be forced out of business," Strasser said. "We also believe that many vendors big and small could be forced out of business as well. Everyone from well-known apparel vendors to small licensees would be impacted."

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