As the world’s biggest bond investors cut off funding to CIT Group Inc., the commercial lender turned to retirees for debt financing.
CIT sold $827 million of debentures designed specifically for individuals between December 2007 and March 2008. At the time, “disruptions” in credit markets led to “the loss of access” to unsecured debt markets, “historically significant sources of liquidity for the company,” the New York-based company said in a July 21 regulatory filing.
It turns out the professionals were right to stay away. The 101-year-old lender said last month it may go bankrupt after $5 billion of losses in the past nine quarters. Retired salesman Sam Pons of Metairie, Louisiana, said he bought $220,000 of the notes through a broker in February 2008 at 100 cents on the dollar. The securities have since tumbled to as low as 44 cents.
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