CIT Group (NYSE:CIT) appears to have secured $3 billion in financing from bondholders to help it avoid filing for bankruptcy. The deal seems to have been reached sometime Sunday night, according to Bloomberg. What is great about this loan is that it comes from the private sector – not Uncle Sam.
The New York Times reported, “Stock markets in Europe and Asia advanced again Monday as already upbeat investors welcomed reports that the CIT Group, the commercial lender, was close to securing enough financing to avoid filing for bankruptcy protection.” The report also caused stock futures to rise on Wall Street.
Not only is the news good for U.S. and international markets, but it is, of course, also good for CIT. MarketWatchreported that in pre-open trading on Monday, CIT’s shares surged 90%.
“The deal will also benefit bondholders, who, while putting in more money and taking more risk, would have lost more if they had forced a desperate sale of assets,” MarketWatch further reported.
Early news of the deal has had a positive effect on U.S. and international markets, adding to hopes that the recession is ending.
When will the recession be over? That’s the question on everyone’s mind, and many are beginning to humor the idea that, while it’s perhaps not over, it is winding down. Reuters pointed to a survey done by the National Association for Business Economics that showed that “demand is stabilizing.”
However, BusinessWeek cautions that it’s still too early to decide whether or not we’re seeing the end of the recession. Three of the top reasons given are:
- Unemployment – if people are not earning money, they are not likely to spend it either.
- Spare Capacity – companies do not need to buy new equipment, yet.
- Debt – enough said.
Editor Christian DeHaemer of Crisis Trader pointed out the positive economic signs in this story. He says, “A year ago, if CIT had announced the possibility of bankruptcy, the market would have been crushed. Yet today, after the government turned down CIT’s plea for help, the company secured financing from the private sector, causing the market to go up. If that is not a positive for bullish sentiment, I don’t know what is.”
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