The nation's vendors are relieved today: CIT has infused its factoring division with $1 billion in cash.
The group's profitable factoring business, Trade Finance, on Friday got a boost when $1 billion was earmarked to fund the operation, a move aimed at proving to vendors that CIT has the money to fund clients' needs.
One source said that of the $3 billion loan facility provided by a group of CIT's major bondholders, $2 billion was made available on July 20 and the final $1 billion was made available on Friday. The parent in turn is earmarking $1 billion for its factoring arm.
In a letter to clients, John Daly, president of Trade Finance, wrote that "CIT Trade Finance is one of the nation's oldest providers of factoring and financing services. The companies that have placed their confidence in us — our clients — range from family-owned and -operated manufacturers to global publicly traded corporations. ...To demonstrate our parent company's commitment to support CIT Trade Finance and our clients, CIT Group Inc. has provided $1 billion of the proceeds from its recently announced financing to CIT Trade Finance. These funds are in addition to other available funding. We believe we have sufficient liquidity to meet our obligations and our clients' needs while our parent company implements its restructuring plan."
CIT Trade Finance "remains open for business. We are actively reaching out to and working with our clients to ensure they continue to access our services needed to run their business. Credit is being checked, invoices are being collected and funds are being remitted," Daly emphasized.
"This definitely relieves their customers' concerns that CIT doesn't have the cash to continue to support them. The factoring group is now able to pay on all of the collections and claims that come in as part of the normal course of business," said Gary Wassner, president of Hilldun Factors, who has been vocal on behalf of the Council of Fashion Designers of America about the need for federal government intervention to save CIT because of its importance to the fashion and retail industries.
Although CIT Group isn't out of the woods yet financially, this new cash infusion is a big boost towards getting the company back on track. Vendors will now be able to draw on their credit lines to purchase fall, winter and spring inventories to keep their stores stocked. It's very good news for the fashion industry.
