London.com

Cited toward bankruptcy, the fear back in the U.S

Posted on November 2nd, 2009 in london news bankruptcy

It’s going to hot a week for the banking industry worldwide. While America is preparing to withstand the collapse of the Cit piloted one of the leading financial institutions in the country specializing in lending to SMEs, the Federal Reserve convenes the heads of major banks in order to clamp down on bonuses. And London is about a possible stew for some of the major British banks underpinned by public aid at the height of the crisis: the market should end up at 700 points, the equivalent of a medium-sized Italian bank.
CIT Group, in trouble for months because of the “credit crunch” and recession, has resorted to ‘Chapter 11′ arrangement with its creditors. “The decision to proceed with our plan of reorganization will allow CIT Group to continue to provide funds to small and medium enterprises, a sector of vital importance to the American economy,” said in a statement the chairman and CEO Jeffrey Peek. In the documents filed with the bankruptcy court for the Southern District of New York Cit mentioned $ 65 billion of debt and assets for 71 billion. Cited points to emerge from bankruptcy in two months and scored a billion investor Carl Icahn to support the reorganization. Even Goldman Sachs, which reduced to 2.125 billion dollars from its original three billion credit line, has promised to keep open the financing during the restructuring. According to rumors, the plan would give bondholders 70% of capital plus the 92.5% of ordinary shares and preference shares (including the strongest of 2.33 billion U.S. government anti-crisis aid already granted) 5 percent .
The collapse of the Cit is fifth in size in the history of U.S. funds, but, thanks to the protection of “Chapter 11,” turning away from the eyes of Wall Street the specter of a collapse that could have devastating effects. According to some, given the links Cited by the U.S. business world, comparable to those caused by the end of Lehman Brothers. Yesterday, Treasury Secretary Tim Geithner said the U.S. banking system has become “dramatically more stable,” yet there is more to do. Today is also the home to roost node of the bonuses: the Fed – which will not be rewarded bankers risk takers – has summoned the leaders of the 28 largest banks in the country to discuss the mechanisms of supervision on wages.
In Europe, the headlights are pointed at London, who – wrote the Sunday Telegraph – is considering selling shares of Lloyds, Northern Rock and Royal Bank of Scotland, the three institutions with the money saved for taxpayers. The slimming was subsequently confirmed, without going into details, the treasury department Alister Darling that there must be “a substantial disinvestment.”
The sale (among prospective buyers are talking about Virginia and supermarket giant Tesco) would create three commercial banks in London and help to recover some of the money spent to help banks, one of several factors that have affected the popularity of Prime Minister Gordon Brown. Lloyds, meanwhile, would gain the support of the majority of shareholders at its maxi-capital increase that could start tomorrow.