CIT Group, the U.S.' largest issuer of vendor finance and the third-largest provider of transportation lending, struck a $3 billion deal with its bondholders that would allow the company to avoid bankruptcy, the Wall Street Journal reported. The news comes four days after the 101-year old financing company announced that it would unlikely be able to to secure additional TARP funds and thus file for Chapter 11 bankruptcy in the coming days. Financials in the S&P 500 finished slightly down, even as Goldman Sachs reported explosive earnings, the day prior to CIT's public announcement.
Keep in mind that CIT provides financing to nearly one-million small and mid-sized company. One has to ask themselves, "if CIT files for bankruptcy, will the liquidity that greases the engines of small-business in the U.S. continue to exist?" If they do indeed happen to file bankruptcy, the market may find it very difficult to believe in a swift economic recovery in the U.S. and hence in the world as a whole. Word of this announcement could spark positive sentiment among global investors and allow risk-appetite to dominate Monday's price action. Carry-trade positioning may also be a theme to watch out for on the news. But as of 19:57 EST, the Japanese Yen appears to be stable with little directional bias being seen.