CIT Group Inc. (CIT) on Tuesday reported net income of $3.2 billion for the fourth quarter, including a reorganization-related $10.3 billion pre-tax benefit and a $6.1 billion pre-tax charge resulting from fresh start accounting adjustments.
The $10.3 billion pre-tax benefit consisted of an $11.2 billion gain on debt extinguishment and related items, partially offset by an $855 million loss on the termination of certain transportation lease agreements and $43 million of expenses and other net costs attributable to the plan of reorganization.
CIT, which providing financing to small and medium size businesses, filed for bankruptcy on November 1 and emerged from bankruptcy on December 10. The prepackaged plan of reorganization resulted in a $10.4 billion net reduction in debt obligations reflecting the cancellation of senior and subordinated unsecured debt obligations and issuance of new secured notes, the cancellation of all preferred stock obligations, including $2.3 billion of TARP invested by the U.S. Treasury, and prior common shareholder interests and the issuance of 200 million new common shares to eligible debt holders.
Following its emergence from bankruptcy, the company adopted fresh start accounting under U.S. GAAP at December 31 and adjusted historical carrying values of assets and liabilities to fair values of assets and liabilities to estimated fair values at or near the emergence date. Total assets were reduced by $8.0 billion or 12.0% to $60.0 billion and total liabilities were reduced by $2.0 billion or 4% to $51.6 billion. All equity of predecessor CIT was eliminated and the fair value of new common equity was determined to be $8.4 billion or $41.99 per share. The fresh start accounting resulted in a pre-tax charge of $6.1 billion in the fourth quarter.
Excluding fresh start accounting and reorganization items, the company reported a fourth quarter pre-tax loss of $1.0 billion due to low levels of net finance revenue, reflecting high borrowing costs, and high credit costs, particularly in corporate finance.
For the full year 2009, the commercial lender reported a net loss attributable to common stockholders of $4 million, as a loss from operations was essentially offset by the combination of fresh start accounting adjustments and reorganization items.
As the consolidated financial statements as of and for the years ended December 31, 2008 and 2007 are not impacted by any changes from fresh start accounting, the 2009 financial statements are not comparable to prior period financial statements.
CIT's consolidated Tier 1 and Total Capital Ratios were 14.2 % at December 31, 2009.
Last month, the company appointed former Merrill Lynch chief John Thain as its Chairman and Chief Executive Officer, replacing its former CEO Jeffrey Peek, who resigned effective January 15.
The company said in a regulatory filing Tuesday that its board and CEO are currently conducting a search for a Chief Financial Officer, a Chief Risk Officer, and certain other senior executives.
CIT shares closed Tuesday's regular trading session at $36.29, down 52 cents or 1.41% but gained 91 cents or 2.51% in after hours trading.
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