CIT affect SW&D?

[dopey]

Does the CIT crisis affect the brands beloved by SW&D much? Are they too small to use a major factor like CIT? This is a case where I could see being a little guy helping.
How about the affiliate stores? You guys don't sell on credit so don't have to finance receivables, but I assume you have working capital lines to finance inventory. Has the CIT mess screwed with that? Have your vendors been **** down because they can't ship?

 

[ppllzz]

will affect nothing. creditworthy borrowers can still go to a real bank according to most sources. uncreditworthy borrowers would go bankrupt with or without cit in this environment.

 

[robin]

They should come to me.

 

[cchen]

Originally Posted by andyliu52

will affect nothing. creditworthy borrowers can still go to a real bank according to most sources. uncreditworthy borrowers would go bankrupt with or without cit in this environment.

haha, absolutely wrong. if CIT goes down, we'll see many small busineses go down as well.

 

[ppllzz]

why? if they are creditworthy they could walk into bank of america/citi/wells fargo or whatever and get a loan. i am sure these banks would be glad to loan money to someone they think is gonna pay it back...

 

[cchen]

Originally Posted by andyliu52

why? if they are creditworthy they could walk into bank of america/citi/wells fargo or whatever and get a loan. i am sure these banks would be glad to loan money to someone they think is gonna pay it back...

in this environment, banks are still hesitant to give out loans to anyone. not as bad as when the credit crunch started, but still bad.

 

[dopey]

Originally Posted by andyliu52

will affect nothing. creditworthy borrowers can still go to a real bank according to most sources. uncreditworthy borrowers would go bankrupt with or without cit in this environment.

Originally Posted by cchen

haha, absolutely wrong. if CIT goes down, we'll see many small busineses go down as well.

Originally Posted by andyliu52

why? if they are creditworthy they could walk into bank of america/citi/wells fargo or whatever and get a loan. i am sure these banks would be glad to loan money to someone they think is gonna pay it back...
As an example, some companies have their cash swept daily and re-borrowed based on inventory and/or receivables available for financing. If CIT is one of their lenders, that portion of the re-borrowing doesn't get funded and the company doesn't have cash to, for example, pay its employees or suppliers. It can't go to another bank because its receivables and inventories are already pledged to the banks in the loan facility that includes CIT.

 

[ppllzz]

Originally Posted by dopey

As an example, some companies have their cash swept daily and re-borrowed based on inventory and/or receivables available for financing. If CIT is one of their lenders, that portion of the re-borrowing doesn't get funded and the company doesn't have cash to, for example, pay its employees or suppliers. It can't go to another bank because its receivables and inventories are already pledged to the banks in the loan facility that includes CIT.

is there something that prevents one of the other bank in the loan facility from covering cit's portion? wouldnt banks want the opportunity to make more money?

 

[dopey]

Originally Posted by andyliu52

is there something that prevents one of the other bank in the loan facility from covering cit's portion? wouldnt banks want the opportunity to make more money?

Usually not, but it might not always be so easy for a bank to do, and certainly not that quickly.

 

[Epaulet]

WWD's report today said that CIT's factoring arm is a separate company from the one that invested in mortgages, student loans and such. There's a good chance that this division will avoid bankruptcy and keep on doing business as usual. Otherwise, there's quite a few competitors that can offer up the same service.

I don't think that this will have enormous long-term consequences, but it could sink a few businesses that don't have the capital to carry them through a transition phase.

 

[cchen]

quote from WSJ

Mr. Calcagne said he spent the afternoon on the phone with his lawyer, asking about how this might play out. "He's looking into it," Mr. Calcagne said. "It's not clear how this all would work, because there's no precedent for it."

Assaf Cohen, a wholesaler of T-shirts and jeans who has been working with CIT for years, said his company, Tradewinds Simply Irresistible, has more than $1 million in receivables held with CIT. He said he isn't sure whether his company will ever see its money if CIT files for bankruptcy. He has suspended shipments to all CIT-backed retailers until at least Monday to see how the situation turns out. "This is hurting my business dramatically," he said.

Like many garment traders, Mr. Cohen uses Merchant Factors Corp., an entity that pools receivables from individual garment businesses to negotiate a lower fee from CIT.

"It has been working well until now," Mr. Cohen said. "Just when we thought that we could breathe a little easier, the news like this is very troubling for retailers and wholesalers like us. Merchant Factors can't tell us whether we can get our money back."

On Thursday, after being bombarded with phone calls from panicked garment businessmen, Merchant Factors sent an email to clients that discussed CIT's financial difficulties: "We at Merchant Factors Corp. want to assure you that we are doing everything possible to make sure that CIT honors its obligations to Merchants and to make contingency plans" should CIT fail.

"But everything is up in the air," Mr. Cohen said.

 

[ppllzz]

looks like the pos is gonna get bailed out by government sachs and jpm

 

[cchen]

Originally Posted by andyliu52

looks like the pos is gonna get bailed out by government sachs and jpm
what? govt already rejected any kind of bailout help. if GS or JPM give the money, it is only short term liquidity to prevent bankruptcy while they figure out a longer term solution. they are not getting "bailed out"

 

[ppllzz]

http://www.zerohedge.com/article/cit...-and-jp-morgan

govt controls (or maybe the other way around) those institutions anyways