Is CIT getting a partner?

Someone was bidding up credit default swaps on CIT huge on Thursday. The "disruption" forced CIT to draw down it's unsecured $7.3 billion credit line.

But it didn't prevent the buyers of credit default swaps, of going crazy with prices. Is this what Gretchen Morgenson of the NY Times was talking about in the previous post? You can bid up credit default swaps, and short the stock, and cause a panic. Here's the story on Bloomberg:

Default Swaps

Credit-default swaps tied to CIT's bonds traded as high as 27 percent upfront and 5 percent a year today, according to broker Phoenix Partners Group in New York, meaning it cost $2.7 million initially and $500,000 a year to protect $10 million in bonds for five years. That's up from 23 percent upfront and 5 percent a year yesterday.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
http://www.bloomberg.com/apps/news?pid=20602007&sid=ay3NuM5_IvHU&refer=rates

CIT has been around for 100 years, and it's franchise has been coveted by financial buyers. Now they can get it on the cheap.

A deep pocketed investor would allow funding at much lower levels, giving increased margins to help compensate for the risk, especially for the middle market environment CIT operates where the margins are good to begin with.

Here's a few highlights from the after-the-close conference call:

It's very early but over the next few weeks we will be looking at various options to refine the mix of assets and businesses in our portfolio so that we can focus on our go forward core commercial finance franchises...

....we will have higher levels of asset dispositions as we size the Company to the new environment and continue to work to optimize the portfolio of businesses that we have at CIT. And the second is something that we have recently started to pursue and it have made some progress on and that's the possible edition of a strategic funding partner to provide an ongoing financing source for select asset classes such as asset based or our middle market leverage loans. And finally we are hopeful that the Fed will continue their efforts to restore liquidity and market stability to the overall markets, enabling us to return to a more normalized funding program over the next several years...

....strategic funding partner to provide an ongoing financing source for select asset classes such as asset based or our middle market leverage loans. And finally we are hopeful that the Fed will continue their efforts to restore liquidity and market stability to the overall markets, enabling us to return to a more normalized funding program over the next several years.....

When a question was asked about selling the company, CIT had this reply:

And in terms of the strategic direction, we are all about shareholder value and that's probably about as far as we can go on that topic.
http://library.corporate-ir.net/library/99/993/99314/items/284721/CIT_liquidconf.pdf