CIT Group like so many other lenders made some seriously bad decisions and got caught up in the subprime mortgage debacle that came to a head towards the end of last year.  Although the centennial bank holding company received 2.3 billion from the government under the Troubled Asset Relief Program last year the government did not award CIT a separate program that would allow it to issue debt at low interest rates. 

On November 1, 2009 CIT Group Inc. (CITGQ.PK) shares plunged 65% to .25 cents after the lender filed Chapter 11 bankruptcy.  Almost immediately following on November 3, 2009 CIT Group announced that the U.S. Bankruptcy Court scheduled a hearing to consider prepackaged plan of reorganization for December 8, 2009.  That is good news.

According to documents reviewed by The Wall Street Journal about 700 companies have a total of $3.9 billion in undrawn revolvers from CIT. Many are small businesses that obtained revolving facilities of about $10 million to $50 million in size. CIT is the sole or main lender to two-thirds of these companies, and a failure of the lender would leave many without access to funds.  With this in mind the the prepackaged plan of reorganization scheduled for December 8, 2009 could very well fall in favor for the bank holding behemoth. 

At just .$018 as of November 6, I'll take a significant risk and order 9,600 shares upon market opening this Monday.  At worst I'm only out $1700 but there is the potential for a nice return over the next six months.

About CIT Group (CITGQ):

CIT is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. www.cit.com

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