Thursday, July 16, 2009

CIT Talking with PEU Boys

Financially distressed lender CIT is in talks with private equity underwriters (PEU's) to save the firm. The federal government passed on further aid to CIT. It has over $2 billion in TARP funds.

Will CIT enter bankruptcy before a PEU deal? That could cram down taxpayers, just as the FDIC zeroed out shareholders in the Carlyle Group et al Bank United deal.

CIT's credit default swaps soared today. Should a PEU strike a deal with CIT, they could compound those returns with timely CDS deals. Likewise, the big money boys could sink CIT.

Which private equity firms are at the CIT table? Did CIT board member Christopher Shayes call any Republican buddies at Cerberus? Did he dial the bipartisan stable on Pennsylvania Avenue, also know as The Carlyle Group? PEU's are known for employing the bondholder Trojan Horse. Which way might the barbarians win? Stay tuned...