Good news, bad news for credit markets
Credit managers' index shows expansion, CIT files bankruptcy
Dave Hannon -- Purchasing, 11/2/2009 2:06:07 PM
The good news in the credit market is that the National Association of Credit Managers' Index ticked up to 51 in October, marking the first time it has reached the growth area (above 50) in more than a year. The bad news from the credit markets came this morning with word that lender CIT Group was in fact filing bankruptcy after weeks of speculation.
In a statement, NACM's Economic Analyst Chris Kuehl said that there were two streams of good news in the NACM data: "Not only has there been some expansion in terms of credit availability, but there continues to be evidence that companies are catching up on their debt...Companies that had been behind in their obligations are catching up in anticipation of further growth and the need to ask for more credit in the future."
In fact, NACM's manufacturing index also rose into the growth realm, mirroring other manufacturing indexes.
However, CIT's Chapter 11 filing could have an impact on a wide variety of companies, most notably midsized firms which the lender specialized in servicing. "Short term, it's going to cause some difficulties for startups and smaller borrowers," said Jean Everett, a partner at Hiscock & Barclay in a Bloomberg report. "CIT lent across so many sectors, it's sort of difficult to predict how it'll affect each sector."
"In the long run it will be good for CIT," said Emanuel Weintraub, CEO of Emanuel Weintraub and Associates management consultancy in a New York Times article. "In the short term it will not be good for thinly financed companies that may not be immediately taken in by other lenders."
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