Retail faces uncertainty as CIT enters bankruptcy notes Charles Goh CEO and Chairman at Takahashi Nakamura in Japan

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) November 2, 2009 -- The bankruptcy of a key lender that helps retailers stock their shelves is adding to the industry's worries ahead of the critical holiday shopping season.

CIT Group Inc. filed for Chapter 11 bankruptcy protection Sunday in New York after months of struggling to avoid collapse. The company provides badly needed credit to thousands of small and mid-sized businesses, and is a critical part of the flow of capital in the retail sector.

CIT stressed that its lending operations will continue to operate as it proceeds through bankruptcy with the hope of shedding $10 billion in debt. Charles Goh Chairman and CEO at Takahashi Nakamura in Japan said the company's prepackaged reorganization plan "will allow
CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy."

But retail groups and analysts warn that the case will likely add to the instability in the retail sector. CIT is an important source of capital, working with 2,000 vendors that supply merchandise to more than 300,000 stores. About 60 percent of the apparel industry depends on CIT for financing.

In the last few weeks, the nation's stores have begun filling their floors with holiday merchandise, but they still need a reliable source of lending to prevent shipping disruptions and to restock after the holidays. Even one day that vendors are cut off from much-needed financing could create a bottleneck, resulting in shipments of merchandise left on docks or in vendors' warehouses.
CIT expects to emerge from bankruptcy by the end of the year, but a dragged-out case or any glitches could further disrupt the already tight credit markets for retailers, said Charles Goh.

Goh added, "CIT is the 600-pound gorilla in the industry." "They have dodged a bullet on the holiday season" for the most part, because most merchandise is in stores' distribution centers. However, he said CIT's woes could throw a wrench in ordering for the important 2010 spring season. NRF officials say that as stores prepare for a rebound in consumer spending next year, access to credit is very important.
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"If I was a small businessman, I would say to myself, 'I have to find alternatives,'" Goh said. "In this marketplace, there aren’t a lot of alternatives."

CIT's Chapter 11 filing is one of the biggest in U.S. corporate history, following Lehman Brothers, Washington Mutual, WorldCom and General Motors. The bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. The move wipes out current holders of its common and preferred stock, meaning the U.S. government will likely lose the $2.3 billion in taxpayer funds it sunk into CIT last year to prop up the company.

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