(Updated from July 16.)CIT's ( CIT) last-minute emergency financing boosted retail shares on Monday. The lender, which has about 300,000 retail clients, struck a $3 billion last-minute deal with a group of creditors to avoid bankruptcy. The news sent the S&P Retail Index up about 1% in morning trading to 337.54. The most notable gains include: Macy's ( M), which jumped 4% to $12.41, JC Penney ( JCP), which grew 2% to $29.41, Dillard's ( DDS), which rose 3% to $8.39 and AnnTaylor Stores ( ANN), which increased 5.5% to $8.79. Last week, after CIT said it probably would not receive a government bailout in the near future, investors feared the worst for the retail industry, which heavily relies on the lender for funding. Some retailers even have suppliers with exposure to CIT, an analyst said Friday, which could slow or stall shipments to stores ahead of the crucial holiday shopping season. FBR Capital Markets analyst Adrienne Tennant said that among the mall-based retailers she covers, Chico's FAS ( CHS), Hot Topic ( HOTT), Talbots ( TLB) and Urban Outfitters ( URBN) have said they have some, but limited, exposure to CIT. Retailers are trying to clear up involvement with CIT for fear that investors may pull back. On Thursday department store Dillard's released a statement saying CIT is no longer involved in the company's $1.2 billion revolving credit facility and does not have any ongoing financing agreements with CIT.
Both the National Retail Federation and American Apparel and Footwear Association have sent letters to the government expressing concerns about CIT's future. AAFA estimates that CIT represents 60% of factoring in the retail and apparel manufacturing industry. Vendors typically accept orders from retailers with an agreement to be paid in 90 days. They then sell their accounts receivable to a factoring company in order to obtain the short-term financing needed to produce the goods ordered. Without factors, suppliers could be forced to shut their doors or retailers would be required to pay up front and draw down on their own credit lines at a time when credit remains difficult to obtain. "A failure of CIT would impact thousands of retailers and, consequently, the consumer spending that makes up two-thirds of our nation's economy," NRF President and CEO Tracy Mullin said in a statement. "That cannot be allowed to happen at a time when retailers are already struggling to survive the national recession."