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- 1. FINAL TRANSCRIPT
CIT - CIT Takes Liquidity Action
Event Date/Time: Mar. 20. 2008 / 4:00PM ET
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- 2. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
CORPORATE PARTICIPANTS
Steve Klimas
CIT Group - VP - IR
Jeff Peek
CIT Group - Chairman - CEO
Joe Leone
CIT Group - Vice Chairman - CFO
CONFERENCE CALL PARTICIPANTS
Phil Walker
White Mountain Advisors - Analyst
Eric Wasserstrom
UBS - Analyst
Michael Cohen
Sonoval - Analyst
David Berstien
Wachovia - Analyst
David Peller
Lehman Brothers - Analyst
Howard Shapiro
FPK - Analyst
David Hockstim
Bear Stearns - Analyst
Ryan O'Connell
Citigroup - Analyst
Mark Schneider
JPMorgan - Analyst
David Hue
Liberty Harbor - Analyst
Sameer Gokhale
KBW - Analyst
Tony Dell Fina
John Hancock - Analyst
Nick Buffalo
Columbia Management - Analyst
Vince Bakhda
Barclays Capital - Analyst
Cary Cantorich
Wellington Management - Analyst
Chris Brendler
Stifel - Analyst
PRESENTATION
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- 3. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Operator
Good day, ladies and gentlemen, and welcome to the CIT call. Joining us today on the call are Jeff Peek, Chairman and CEO, Joe
Leone, Vice President, Chairman and CFO, Steve Klimas from Investor Relations. At this time, all participants are in a listen-only
mode. We will be facilitated a question-and-answer session towards the end of the conference. (OPERATOR INSTRUCTIONS).
As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your
host for today, Mr. Steve Klimas. Please proceed, sir . Please proceed, sir.
Steve Klimas - CIT Group - VP - IR
Thank you, Stacy, and good afternoon, everyone. Welcome to the CIT conference call.
Just a couple of quick items before we get started today. First following our formal remarks we will have a limited Q&A session.
In an effort to be as efficient and to make sure we get to as many questions as possible we ask that you limit yours yourselves
to one question. I would also like to reiterate that today's call is to discuss the liquidity actions we took earlier in the day so
please limits yourself to questions related to that topic. We expect to report our first earnings and host a conference call regarding
such on Thursday April 17. Second, elements of this call are forward-looking in nature and relate only to the time and date of
this call. We disclaim any duty to update to this statements base on new information, future events or otherwise. For information
about risk factors relating to the business please refer to our SEC reports. Any references to certain non-GAAP financial measures
are meant to provide meaningful incite. For more information on CIT including non-GAAP reconciliation please visit the Investor
Relations section of our Web site at www.CIT.com.
With that, it is now my pleasure to hand the call over to Jeff Peek, our Chairman and CEO.
Jeff Peek - CIT Group - Chairman - CEO
Thanks, Steven. Good afternoon, everyone, and thanks for joining us on such short notice. Needless to say it's been quite a busy
period of time and I know many of you have been reaching out to us for updates. I think what we'd like to do this afternoon is
provide you with some more details on our earlier announcement that we tapped our bank line and take a few of your questions.
Before I get into our thinking behind drawing down our bank facilities I just want to assure you that it has nothing to do with
the health of our commercial franchise businesses. These commercial finance businesses still have broad-based asset quality
which remains quite solid, profitable new business opportunities are quite plentiful there and profitability of these commercial
finance businesses while pressure from an increased cost of funds is still decent.
Now let me move on to the drawdown of our bank lines. I want to say at the outset that this was not our preferred path but
one that we decided is best for the Company long-term. As many of you know in our 10-K and elsewhere we presented a funding
plan which we thought was very realistic and achievable. However, recent events made the execution of that funding plan less
certain with regard to timing and certainty. We have been assessing the feasibility of continuing to execute against that financing
plan and taking input from our banks, our underwriters and our commercial paper dealers. These discussions along with the
input from our Board of Directors led to our decision to draw on our bank facilities as we felt it important to continue to
demonstrate strong liquidity to you and our customers. Now we've said repeatedly that will these committed credit facilities
were a part of our alternative liquidity program. While it was not our preferred choice we did think that it was the prudent thing
to do at this time in the current environment.
So despite having cash available by drawing on these facilities we can achieve three goals. First, we maximized the operating
flexibility in this uncertain Capital Markets environment. Second, we ensure that we have the funding and the capital in place
to meet our near-term obligations and, third, and equally important we continue to support our customer relationships. Now
today's release also mentioned that we would evaluate the sale of various assets and or business lines. Let me just add to that.
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- 4. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
We recognize that given the current market environment we need to run a smaller company. 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. Now with that let me turn the call over to Joe to walk you through some
of the details of our current funding plan. Joe?
Joe Leone - CIT Group - Vice Chairman - CFO
Thank you, Jeff. And good afternoon to you all. Thanks for joining. Let me start by saying that CIT has a strong balance sheet,
diverse and high quality commercial assets, a significant portion of which are still unencumbered. That's roughly 45 billion at
the end of February. We in short have very good commercial lending and leasing franchises. Our tangible equity managed
assets ratio I'm sure you're familiar with this was above target at year-end. It was above 8%. Funding has been tight. We've been
talking to you about that. But we felt we had a line of site on meeting our needs by working on the plan we had laid out to you.
And then as Jeff said the last week with the markets weakening again liquidity further tightened for us. So rather than pursue
those transactions on that tight time frame when timing was less certain we felt it made sense to draw the bank facilities from
the group of 40 or so banks that have supported CIT so well during my 20 years here.
What did we do specifically? We drew on four separate facilities aggregating over $7 billion. All of the facilities share substantially
the same terms with differing maturity dates. Let me break that down for you; 2.1 billion matures in October of '08, 2.1 in April
of '09, 2.1 in April '10 and about 1 billion in December of 2011. Pricing on the facilities is based on a ratings grid and at today's
ratings we will pay approximately LIBOR plus 50 and under no scenario does it, the price exceed LIBOR plus 100 or so.
What will we do with the proceeds? We continue to intend to be judicious with liquidity prioritizing its use, paying off commercial
paper and other debt obligations as they come due, continuing to meet the needs of existing client relationships and
commitments and, of course, we'll be working with our banks to pay off these facilities as soon as it's prudent. Based upon our
remaining 2008 debt maturities our forecasted, currently forecasted assets levels, related or in process planned asset sales and
anticipated financing outside of CIT credit these proceeds should satisfy our needs for the balance of the year.
At the same time we continue to work on executing asset backed finance things we had outlined in our previous plan. We
continue to work at those. Having said that we've adapted our plan to the current environment. As you know the original plan
called for CP remaining basically flat at year-end levels and basically flat assets. Of course now we are assuming commercial
paper will roll off and we are working to shrink the balance sheet as Jeff had described. So we'll continue to be judicious with
asset origination. We will look at accelerating asset sales to the extent we can. And, as Jeff said, we are conducting strategic
reviews. What isn't changing is our commitment, our commitment to strong debt ratings. We would like to target. We are
targeting to get back to mid-single A or better over time. We are committed to maintaining adequate levels of capital and that's
higher than the 8.5% that I described earlier based on today's portfolio mix. And finally we are committed to continuing to
giving you good communication.
With that let me turn it back to Jeff for some closing comments.
Jeff Peek - CIT Group - Chairman - CEO
Thanks, Joe. Now before we wrap up I just want to spend a minute on some thoughts for repaying these facilities and running
to a normalized funding program. And as we progress through this work we'll continue to update you over the next several
weeks.
Now in terms of the repayment of these bank facilities, there are at least two possible scenarios that I can envision. And the first
is almost a certainty as both Joe and I have mentioned, 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
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- 5. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
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. Now with that,
I want to thank you for your continued interest and support and we'll be happy to answer a few questions. Thank you.
QUESTIONS AND ANSWERS
Operator
(OPERATOR INSTRUCTIONS) . Your first question comes from the line of Phil Walker with White Mountain Advisors. Please
proceed.
Phil Walker - White Mountain Advisors - Analyst
Thank you for having the call today. I guess, Joe, we've been through this a number of times with you guys and I guess the
question that everyone is asking is, Jeff touched on a strategic partner. Maybe could you expand on that a little bit more? And
you also mentioned selling discrete businesses as a potential option. So can you maybe talk a little bit more going down that
path some?
Joe Leone - CIT Group - Vice Chairman - CFO
Well, what we've said over time is that what CIT does very well is originate commercial loans and leases in the middle market.
And clearly today our funding capacity is not a strength. So what we've been attempting to do and Jeff described briefly and I
can't give you much more details than that is marry so to speak the origination capabilities we have in the middle market
particularly in this environment in the middle market where the risk and pricing are very attractive with a funding partner who
has funding available and is looking for a place to put that at good risk adjusted returns. So that's basically as much description
as I can give you at this point but we continue to work hard at that.
Jeff Peek - CIT Group - Chairman - CEO
Phil, I just add on to that there are kind of deposits rich asset poor banks depositories that are still out there so we've been
visiting with some of them to try to put together that would basically just be funding arrangement for them where they would
be able to use their excess deposits to generate assets for themselves.
Steve Klimas - CIT Group - VP - IR
Thanks, Phil. Move on to the next question, Stacy.
Operator
Next question, Eric Wasserstrom, with UBS. Please proceed.
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- 6. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Eric Wasserstrom - UBS - Analyst
Thanks, Joe, I just want to do make sure I understood the comment that you made. You said presumably the drawdown of these
facilities plus the cash that you had on balance sheet which I think at year-end was like 6.3 billion. That's enough to meet your
funding needs for the year. Is that correct?
Joe Leone - CIT Group - Vice Chairman - CFO
Yes, I guess what I said based upon our asset projection for the year our asset roll offs, the maturities we have in terms of debt,
the asset the payments we have under assets and certain asset sales that we have we think the combination of that, it's conduits
we have in place that still have capacity, particularly in equipment finance in combination with those and the draw; we see that
meeting the maturities for 2008.
Eric Wasserstrom - UBS - Analyst
Thanks, and the home equity assets, are those encumbered or are those considered to be salable?
Joe Leone - CIT Group - Vice Chairman - CFO
As you know, Eric, in October, I guess we did it in September, we took about $7 billion of the collateral and traunched it up and
sold the AAA securities which amounted to about $5 billion of the $7 billion. So the $7 billion is considered encumbered. Having
said that, we sold $5 billion of the AAA and the other securities are available for sale if we thought there was an appropriate
price to sell that at. We are not holding it for sale. I just want to make myself clear. We are not holding it for sale but those
securities could be sold if we chose to do so.
Eric Wasserstrom - UBS - Analyst
Thank you.
Steve Klimas - CIT Group - VP - IR
Thank, Eric, Stacy we will take the next question, please.
Operator
Next question, Michael Cohen with Sonoval, please proceed.
Michael Cohen - Sonoval - Analyst
Thanks, guys. Can you be a little specific about, I know there's a net worth covenant in the credit agreement. There are other
covenants that are in there that say what you can do and what you can't do when you look at them read a lot like a lot of boiler
plate legal language. Can you kind of provide some commentary as to what flexibility it inhibits you from doing and what it
allows you to do?
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- 7. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Joe Leone - CIT Group - Vice Chairman - CFO
I'm not sure I understand the question. We notioned the bank on the draw today and the funding has again on that draw today
and we've spoken to just about every bank in the syndicate. You mean going forward?
Michael Cohen - Sonoval - Analyst
Yes, I assume that once you draw on the lines there are certain covenants that you have to meet to be able to continue to be
in good standing if you will.
Jeff Peek - CIT Group - Chairman - CEO
There's a minimum net worth covenant which we easily surpass, Michael.
Joe Leone - CIT Group - Vice Chairman - CFO
And that covenant is at the time of draw.
Jeff Peek - CIT Group - Chairman - CEO
It's an issuance.
Michael Cohen - Sonoval - Analyst
Okay, but none of the others of the covenants will strip what you can do in terms of which assets you can cell and which assets
you can incumber?
Joe Leone - CIT Group - Vice Chairman - CFO
No.
Michael Cohen - Sonoval - Analyst
Okay, great.
Steve Klimas - CIT Group - VP - IR
Thanks, Michael. Michael, I think we are going to try to limit ourselves to one question per caller to get to everyone, Stacy, we'll
take the next question, please.
Operator
Okay. The next question is comes from the line of David Bernstein with Wachovia. Please proceed.
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- 8. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
David Berstien - Wachovia - Analyst
Hi, good afternoon. Because of your bank deposit company in Utah, how much are you able to draw on the recently changed
opportunity from the Fed? Are you able to pledge any assets and use other collateral to go directly to the discount market.
Joe Leone - CIT Group - Vice Chairman - CFO
No, we don't have the opportunity to go to the Fed window. We do have the opportunity and have done in the limited way to
go to the FHLB with some collateral.
David Berstien - Wachovia - Analyst
How about CP is outstanding today, is it where you were at the end of the year or has it gone up since the 2.8 billion that had
you in the K.?
Joe Leone - CIT Group - Vice Chairman - CFO
No, it's come down, it's 2 billion or slightly less.
David Berstien - Wachovia - Analyst
And you drew the entire $7 billion of back up lines today or did do you less than the 7 billion?
Joe Leone - CIT Group - Vice Chairman - CFO
We drew the entire 7.3. Thank you.
Steve Klimas - CIT Group - VP - IR
Thank you, we will take the next question, please.
Operator
Your next question comes from the line of David Peller with Lehman Brothers. Please proceed.
David Peller - Lehman Brothers - Analyst
Thanks, so at the end of the year I think you had around 5 billion in cash on the balance sheet and it sounds like some of it was
used to pay off some of the CP at least. Where do we stand now on the cash level?
Joe Leone - CIT Group - Vice Chairman - CFO
Over the last week or so we've averaged in the 2.5 to $3 million area including the bank which is a comparable number to
(inaudible)
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- 9. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
David Peller - Lehman Brothers - Analyst
So there's about two to three on behalf of the 7.5 billion bank line basically available for the rest of the year? That was the
average for the week, today, yesterday , we had some other CP maturities. So it's somewhat lower.
Steve Klimas - CIT Group - VP - IR
Thanks, next question, please.
Operator
Your next question comes from the line of Howard Shapiro with FPK. Please proceed.
Howard Shapiro - FPK - Analyst
I'm just wondering if you could explain if there was a specific action or incident that precipitated this? In other words, were you
inability roll your CP? Were you trying to get off the securitization and it failed in the market? What exactly precipitated the
action at this time? Thank you.
Jeff Peek - CIT Group - Chairman - CEO
Well, Howard where he had probably three or four different funding initiatives that we were working towards with a view
towards May and I think given the volatility and certain recent events here on Wall Street those became more difficult and with
a lot of transactions in this environment they don't, nobody says no automatically. They just seem to be a lot more difficult to
do and they stretch out in time and so our view was at the most prudent thing to do rather than fight through that with an eye
towards the May maturities was to go ahead and take down the bank facilities and give ourselves the breathing room and take
some of the anxiety out of the air as to having the funding in place. Not a only to meet those maturities but as Joe said to get
us through the rest of the year and also make sure that we could continue to fund our most important clients.
Howard Shapiro - FPK - Analyst
Thank you.
Steve Klimas - CIT Group - VP - IR
Thanks, Howard, next question, please.
Operator
Your next question comes from the line of David Hockstim with Bear Stearns. Please proceed.
David Hockstim - Bear Stearns - Analyst
Thanks, I'm sorry I missed the beginning of the call, did you say what the maturity schedule is on the replaying CP and how
much you were going to sell in assets and over what period?
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- 10. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Joe Leone - CIT Group - Vice Chairman - CFO
No, we didn't, the CP is about $2 billion outstanding. It had an average maturity in the 40 to 50 day area and we did not mention
the asset sales.
David Hockstim - Bear Stearns - Analyst
That was 40 or 50 at the beginning of the quarter?
Joe Leone - CIT Group - Vice Chairman - CFO
No, no.
David Hockstim - Bear Stearns - Analyst
Today.
Joe Leone - CIT Group - Vice Chairman - CFO
As of this week.
David Hockstim - Bear Stearns - Analyst
Okay. And the timing of the funding partner.
Joe Leone - CIT Group - Vice Chairman - CFO
I'm sorry.
David Hockstim - Bear Stearns - Analyst
The timing on the funding partner, what does that look like in terms of realistically, I mean is that a month, two months, six
months?
Jeff Peek - CIT Group - Chairman - CEO
I don't think it's six months. I think we've got preliminary discussions with several we've, we've gotten close with one and the
environment backed away a little bit. The only thing I'd add is I think you will see us I think asset, we sell assets almost every
quarter. But I think you'll see us step that up whereas set sales will certainly be in the middle billion dollars range.
Steve Klimas - CIT Group - VP - IR
Thanks, David.
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- 11. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Operator
Your next question comes from the line of Ryan O'Connell with Citigroup. Please proceed.
Ryan O'Connell - Citigroup - Analyst
Thanks. Say, Joe, just, you've got a bunch of asset backed bank facilities starting to come up for renewal particularly I guess in
Q3. Did you have a level of concern about the bank's willingness to renew those?
Joe Leone - CIT Group - Vice Chairman - CFO
Well, the banks are pulling back on conduit availability. I would say, yes, that's environmentally true. We did have good success
in renewing some of our facilities as recently as the fourth quarter. The facilities or the assets that we use our facilities for are
principally vendor finance, equipment finance and student lending and we have additional existing capacity in the equipment
finance conduits and our originations on the student lending side will be minimal. So, yes, in this environment renewing conduits,
it's clearly something that's on our mind. Having said that on the equipment side the collateral has had terrific performance.
We've been able to term out from the conduits into the public markets at very attractive prices. And those securities have
performed very well in the public marketplace. So hopefully because of the performance of that collateral we could continue
to see availability in that asset type, particularly since we've been able to term those type of assets out into the public markets
relatively efficiently. Okay?
Steve Klimas - CIT Group - VP - IR
Thanks, Ryan. We'll take the next question, please, Stacy.
Operator
Your next question comes from the line of Mark Schneider with JPMorgan, please proceed.
Mark Schneider - JPMorgan - Analyst
Good after noon.
Steve Klimas - CIT Group - VP - IR
Mark, do you have a question for us? Stacy, let's move on to the next questioner, please.
Operator
Bear with me momentarily, please. Next question comes from the line of David Hue with Liberty Harbor. Please proceed.
David Hue - Liberty Harbor - Analyst
Can you provide some color whether or not on your existing on and off balance sheets asset backed facilities that there are any
ratings based triggers?
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- 12. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Joe Leone - CIT Group - Vice Chairman - CFO
I think there is ratings triggers relative to pricing. There is ratings triggers relative to cash distribution. What I mean by that at
certain ratings levels we have to remit the cash on a daily basis rather than aggregating it. I do not believe there is any termination
provisions based upon ratings. But, IR would have to follow up with you. That's to the best of my recollection that's what I have.
David Hue - Liberty Harbor - Analyst
And just to confirm one other point, with respect to the ability to essentially incumber some of the unincumbered collateral
there's no indentures or other limitations in the existing credit facilities on our off balance sheet that would limit your flexibility
in that regard?
Joe Leone - CIT Group - Vice Chairman - CFO
No.
David Hue - Liberty Harbor - Analyst
Thank you.
Steve Klimas - CIT Group - VP - IR
Thank you, David.
Operator
The next question, Stacy. Next question comes from the line of Sameer Gokhale with KBW, please proceed.
Sameer Gokhale - KBW - Analyst
Thanks for taking my question. Some color perhaps on the commitments that were mentioned in the 10-K of 10.4 billion, I
understand those are commitments by CIT to hundreds of your customers, but it would be helpful to get a sense for, are you
seeing an increase in the amount of demand for your customers, in other words, as the amount of your funding requirement
increased since the end of last year on those commitments or is the weakness of the economy resulting in decreased demand
relative to a commitment? Just some color would be helpful, thanks.
Joe Leone - CIT Group - Vice Chairman - CFO
Some of that relates to commitments we have outstanding on airplanes, I believe, some of it relates to commitments on
commercial loans, some of it relates to commitments on rail car deliveries, I think on the commercial loan side in the first two
months of the year we did see slightly higher utilization on the commitments than we did at the same seasonal time last year.
Sameer Gokhale - KBW - Analyst
That's helpful. Thank you.
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- 13. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Steve Klimas - CIT Group - VP - IR
Thanks, Sameer, next question, Stacy.
Operator
Your next question comes from the line of Tony Dell Fina with John Hancock.
Tony Dell Fina - John Hancock - Analyst
Yes, thank you, gentlemen. Certainly looking at your receivables collection chart on your 10-K you certainly have a lot of dough
that could you stow away to pay off debt and obviously shrink the Company without going to the asset sales route. Could you
tell me what your 2008 projection for due loan originations are? You basically said flat at the fourth quarter call. What do you
project for '08 and certainly the issue is you can certainly shrink without asset sales and use that to pay off debt. Or you find
new customers. I guess right now given the intensity of the distress in the market which one are you going to use right now
before you shift back to normal operations? I guess which one would you pick of those two alternatives right now?
Jeff Peek - CIT Group - Chairman - CEO
Well, I think, Tony, I think that our projection basically is to keep assets pretty much flat. We do have a couple of run off portfolios
such as mortgages. Mortgages is paying off about $120 million a month. And I would say that our first priority here is to try and
fund our most valuable relationships and keep those functioning, keep those alive, keep those breathing. And we haven't had
any trouble doing that so far. And I think the asset sales that you will see will be noncore portfolios, possibly some of the
nonstrategic businesses. I think rather than limiting everybody to new funding we probably would rather get rid of some
tangential businesses and be allowed to continue to grow some of our franchise businesses.
Tony Dell Fina - John Hancock - Analyst
But, Jeff, 21 billion in receivables can certainly be ordered to pay off a lot of obligations horded, and I guess at this point in time
given the distress in the market how much of that will you horde and how much will you reinvest? I know it sounds nice for our
best customers but we heard on the Moody's call earlier they looking for a plan and were funding their best customers is going
to make them happy.
Jeff Peek - CIT Group - Chairman - CEO
You will see us selling discrete business, Tony, is that responsive?
Tony Dell Fina - John Hancock - Analyst
No, it isn't. How much are you going shrink to I guess is the question?
Jeff Peek - CIT Group - Chairman - CEO
Well, I think as we said our projections is that our managed assets will be flat for the first quarter. And I would think asset sales
would probably approximate someplace around 5 to $7 billion as our first go.
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- 14. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Steve Klimas - CIT Group - VP - IR
Thanks, Tony.
Jeff Peek - CIT Group - Chairman - CEO
Tony, I'm happy to follow up off-line with you.
Tony Dell Fina - John Hancock - Analyst
Right, thank you, Jeff.
Steve Klimas - CIT Group - VP - IR
Thanks, Tony, I think we are going to move on, Stacy.
Operator
Your next question comes from the line of Nick Buffalo with Columbia Management.
Nick Buffalo - Columbia Management - Analyst
Hi, a quick question, obviously a lot of your '08 paper now trading in the market looks like the low to mid 80s, I was wondering
if you had given any consideration with regards to a tender option for some of your short maturity debt? Thank you.
Joe Leone - CIT Group - Vice Chairman - CFO
I don't think so. Clear what will we want to do is have the highest amount of liquidity in the Company. So we would not do that
at this time.
Steve Klimas - CIT Group - VP - IR
Thanks, Nick, take the next question, Stacy?
Operator
Your next question comes from the line of Vince [Bakhada] with Barclays Capital. Please proceed. Your line is open. You may
ask your question.
Vince Bakhda - Barclays Capital - Analyst
Hi, guys, sorry, when I think about the strategic direction of the Company, should I think about the company as sort of having
the same broad level of businesses with just a lower level of assets in each of those businesses? Should I think of you having
fewer of the businesses and where would the thrust be in terms of what the keepers are and what are the ones that may not
be keepers or should we think about where the a function of where the get the best execution for asset sales?
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- 15. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Jeff Peek - CIT Group - Chairman - CEO
I think that's an excellent question. As we think of the go forward businesses, we clearly focus around the four commercial
finance businesses, trade finance, transportation finance, corporate finance and vendor finance. And so our first wave of
dispositions would be anything that's outside of those areas. And then we have to do a little bit more analysis on kind of what
the independency are between those four commercial finance businesses. But we do see those businesses as our more marquee
businesses and we would like, we would like to keep them intact as much as possible. And when I talk about our first level of
asset sales of 5 to 7 billion, it would really not materially impair any of those four businesses.
Vince Bakhda - Barclays Capital - Analyst
Thanks, guys.
Jeff Peek - CIT Group - Chairman - CEO
Does that help you?
Steve Klimas - CIT Group - VP - IR
Thanks. Stacy, I think we are going to take two more questions.
Operator
Your next question comes from the line of Cary [Cantorich] from Wellington Management. Please proceed. Can you.
Cary Cantorich - Wellington Management - Analyst
Can you hear me?
Joe Leone - CIT Group - Vice Chairman - CFO
Yes, we can.
Cary Cantorich - Wellington Management - Analyst
?Hi, I have just a quick question, I just want to follow up on the cash question that you gave some guidance on, the 2.5 to 3
billion, you said that included the bank. The bank cash is 2 billion, right, and that is pretty much trapped in that bank?
Jeff Peek - CIT Group - Chairman - CEO
We used some of the bank cash. We have been booking commercial loans in the first quarter in the bank. I don't have the break
down for you but we have utilized some of the cash in the bank.
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- 16. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Joe Leone - CIT Group - Vice Chairman - CFO
I would say closer to 1.5 billion.
Cary Cantorich - Wellington Management - Analyst
1.5 billion, of 22.5 in the bank.
Joe Leone - CIT Group - Vice Chairman - CFO
Yes.
Steve Klimas - CIT Group - VP - IR
Okay, thank you. We will take one more, Stacy.
Operator
Last question comes from the line of Chris Brendler with Stifle.
Chris Brendler - Stifel - Analyst
Hi, good afternoon. I guess going back a little bit, the extreme stress in the markets today and your decision today to pull the
bank lines, is that basically start the clock ticking on finding a permanent solution, i.e. selling the company? It seems to me that
the level of stress continues to get worse and I would think that would be an alternative that would be the best resolution for
everyone involved. And have you had any of those conversations yet? And maybe you can get an update on any development
in the asset quality of this portfolio, is it a high quality portfolio with the exception of the sub-prime mortgage book and I just
want to know if you had any other additional thoughts on that front. Thanks.
Joe Leone - CIT Group - Vice Chairman - CFO
I think on the asset quality on the commercial finance businesses, Chris continues to be quite solid. Certainly better than we've
historically said the average to predict. We don't see a cataquizmic fall off in the commercial book at all. I think we do see reduced
recoveries which will play into it. 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.
Chris Brendler - Stifel - Analyst
I guess asked another way has anything changed from the end of the year and through today on the asset quality front that
has produced problems or are these funding issues completely market related, that's my sense, I wanted to get your opinion.
Joe Leone - CIT Group - Vice Chairman - CFO
Yes, I think they are primarily market related. As we said if you track back probably our high watermark in terms of asset quality
was probably the fourth quarter of '06 and in the commercial book, we've seen a very gradual deterioration since then in terms
of nonperformers and that type of thing and there's more headwinds today so that continues. But as I said it's, it's gradual and
it's a trend as opposed to anything dramatic.
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- 17. FINAL TRANSCRIPT
Mar. 20. 2008 / 4:00PM, CIT - CIT Takes Liquidity Action
Chris Brendler - Stifel - Analyst
Thanks, Jeff.
Steve Klimas - CIT Group - VP - IR
Thanks, Chris. Stacy, I think that's going to conclude the call today. We just would like to thank everyone for their continued
interest and continued support of CIT. Again we are looking to report our earnings on Thursday, April 17, and we will be hosting
a conference call that morning to discuss the results. Thank you.
Operator
Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Have a
good day.
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