CIT Springs an Extraordinarily Selective Bankruptcy. Guess Who's on the Short End?
CIT preparing to seek Chapter 11 bankruptcy protection as early as Sunday Filing could wipe out U.S. stake and have broad ripple effect By Tomoeh Murakami Tse Washington Post Staff Writer Saturday, October 31, 2009 NEW YORK -- CIT Group, a major lender to small businesses, is preparing to file for Chapter 11 bankruptcy protection as early as this weekend, sources familiar with the matter said Friday, which would likely wipe out the federal government's $2.3 billion stake in the company. A CIT bankruptcy filing would be one of the largest in U.S. history, with potentially broad ripple effects. The firm provides loans to about 1 million companies, including many already struggling in the economic downturn. . . . Under the pre-packaged bankruptcy, CIT bondholders would recover 70 cents on the dollar in new notes and equity in the reorganized company. But documents filed with the Securities and Exchange Commission show that preferred shareholders -- including the U.S. government -- would …