By Steven Church and William Rochelle July 18 (Bloomberg) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors. Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had difficulty getting cash from CIT, its lender. The company has tried to negotiate with CIT, though âthe federal governmentâs recent decision not to support CITâs reorganization has thrown CIT into disarray and casts substantial doubt on CITâs ability to continue to fund the Debtorâs working capital requirements,â Moore-Handley said in documents filed in U.S. Bankruptcy Court in Birmingham, Alabama. CIT has reported $3 billion of losses in the past eight quarters and has been in talks with lenders about funding its own possible bankruptcy, according to people with knowledge of the matter. CIT may need as much as $6 billion to avoid filing for bankruptcy protection after the U.S. wouldnât give the firm a second bailout, according to CreditSights Inc. Curtis Ritter, CITâs director of media relations, didnât immediately respond to a request for comment. The company received $2.33 billion in funds from the U.S. Treasury in December and hasnât been given access to the Federal Deposit Insurance Corp.âs debt-guarantee program. âCrisisâ for Retailers CIT has said its bankruptcy would put 760 manufacturing clients at risk of failure and âprecipitate a crisisâ for as many as 300,000 retailers, according to internal documents. CIT accounts for about 70 percent of all short-term U.S. financing known as factoring, worth about $40 billion annually, according to Ray Ecke, president of Credit Management Resource in Oakland, New Jersey. In factoring, one company purchases anotherâs accounts receivable. Moore-Handley said in court filings that it owes CIT $18.8 million in secured debt, including $11.2 million on a revolving credit line and $6.4 million on a term loan. It also owes $1.25 million to equipment lenders. Moore-Handley also has been hurt by the slowdown in the housing market, with sales for 2009 expected to be 20 percent lower than last year, the company said in court records. To survive the downturn, the company hired financial Carl Marks Advisory Group LLC and formed a plan to cut expenses. Even with that effort, the company has had trouble getting funds from CIT under their current financing arrangement, Moore- Handley said. Hardware Stores The company said its main customers are independent hardware and building-supply stores and small, family-owned chains. Its core customers are in the Southeast. Moore-Handley is asking the bankruptcy judge in Birmingham, Alabama, for authority to use cash pledged as collateral to CIT even though it doesnât have consent from the New York-based lender. The Alabama company calls itself the second-largest independent hardware and building material distributor in the U.S. It reported a loss of $1.6 million last year on net sales of $145.5 million. Through June 30, the company already lost $2.4 million. The case is In re Moore-Handley Inc., 09-04198, U.S. Bankruptcy Court, Northern District Alabama (Birmingham). http://www.bloomberg.com/apps/news?pid=20601087&sid=av5fBQGI8U9w So Wall Street is worth a bailout, CIT not ? Good to know that the Obama administration obviously gives a sh.t about small businesses...
Yea, I can sense the administration losing some political capital over this. At least this is capitalist. Cit was usury lender, let um go down. Recessions will cull the weak, this is supposed to happen.
This could hit hard next week. I was looking at the numbers and the sentiment, and everything looks aligned for a nice tumble next week. We shall see...
All articles I see now are about JPM and others providing financing during a BK. So it looks like they are gone. Probably a story tomorrow and a file Monday.