hit by considerable losses in the last quarter, fuelling
speculation that Siemens Financial Services could step in to
acquire the business unit.
Siemens FS is understood to be
considering acquiring at least part of CIT’s business, in
particular its European aircraft finance and vendor finance arms,
according to well placed sources.
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The vendor finance unit reported a net
loss from continuing operations of $354.8 million (€276 million)
for the three months ending on 30 September, compared with a net
income from continuing operations of $10.9 million in the previous
quarter.
This is set against double-digit
returns in transportation and trade finance arms. Its corporate
finance business also remains profitable.
CIT’s third quarter statement said
that the company’s $363.6 million goodwill and intangible asset
impairment charges “related to the vendor finance segment triggered
by diminished earnings expectations for the segment, coupled with
the prolonged period that our stock has traded below book
value”.
In January CIT sold its 30 percent
stake in Dell Financial Services’ US arm. CIT retains a strong
relationship with DFS in Europe, including providing financing for
Dell products in several European countries, including France, the
UK, Spain, Italy and Germany.
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By GlobalDataCIT CEO Jeffrey Peek admitted that
vendor finance returns were “disappointing”, and that the company
was undertaking a “restructuring” of that unit.
In recent weeks Terry Kelleher, the
head of CIT’s global vendor finance, resigned after less than a
year in the post.
Meanwhile, several people close to
both CIT and Siemens FS said they believed SFS was considering
putting in an offer for parts of CIT’s business.
A source familiar with the situation
told Leasing Life: “I would not be surprised if some global
companies were interested in CIT, because it has some
infrastructures across the world in its vendor and aircraft
businesses that could be tempting for them.”
Another source said: “CIT has got a
very good relationship with Microsoft which I am sure SFS would be
interested in getting hold of.”
CIT has been forced to sell-off its
home lending business over the summer to reduce its exposure to bad
mortgages.
Overall CIT reported a loss of over
$317 million, and wrote down $455 million before taxes of goodwill
and other intangible assets to its finance business segment. It
said that the business volume drop from the prior quarter reflected
declines both in Europe and the US.
However, despite its current
difficulties, CIT assured it was advancing its liquidity
initiatives, and was committed to maintaining significant cash
balances.
It added that during the previous
quarter, it had prepaid $2.1 billion in bank borrowings and repaid
$1.5 billion of unsecured-term debt, as well as the remainder of
its outstanding commercial paper. For the nine-month period, it
posted a net loss of $2.65 billion attributable to common
shareholders, compared to a net income of $19.7 million for
2007.
Antonio Fabrizio
