CIT Group Insolvency Could Wreak Havic on Fashion, Retail Industries
The fashion industry is extremely worried that one of the main sources for financing for thousands of small to medium sized vendors and stores is about to go bankrupt. Virtually unknown to the buying public CIT Group is a crucial part of the retail fashion scene. And if it goes under, so will many other businesses. CIT Group had been hoping for a bailout from the federal government because of all the jobs depending on its continued financial health, but it looks like that isn't going to happen.
The disclosure raised the possibility of a bankruptcy filing by the financial giant and left many vendors and retailers in limbo about how they'll finance their fall shipments and finance their businesses.
"This is terribly upsetting," said Gary Wassner, president of Hilldun Factors. "This will upset the entire shipping season. It will be very disruptive. I am surprised that the government would not think about the thousands of people that would be affected. This also impacts so many people on the periphery [of the apparel industry]."
Hours before the 6 p.m. announcement from CIT, there was a flicker of optimism when trading was halted on the lender's stock in the final half hour of trading, with shares up 3 cents to $1.64. Considered a likely prelude to a major announcement just as President Obama was being briefed on the situation. Hope surrendered to fear just two hours later.
The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. have been discussing whether to rescue CIT, which already received $2.33 billion in federal funds.
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Kevin Burke, president and chief executive officer at the American Apparel & Footwear Association, said members of his board estimated CIT represents about 60 percent of factoring volume within the apparel industry. A failure "would be another nail in the coffin," he said. "It would be devastating. It would have a very strong impact on the industry's ability to get products to the consumer."
CIT Group is the fashion industry's largest factor. If it goes down, there will be major negative repercussions across the fashion and retail industries as many stores will be unable to purchase fall and winter merchandise. Larger department stores have their own bank credit lines, but emerging designers are going to be especially hard hit by this.
