CIT Group: A last-minute deal buys time
After failing to secure a federal lifeline, CIT Group has been rescued, at least temporarily, by a consortium of its creditors, said Michael de la Merced in The New York Times. The $3 billion emergency loan “will buy CIT some time to restructure its business model and reduce its voluminous debt load.” The money will allow CIT—“one of the nation’s leading lenders to small- and medium-size businesses”—to keep operating while it sets up a mechanism to exchange debt held by creditors into equity. Federal regulators decided against aiding CIT after determining that its failure would not threaten the financial system.
Before securing the last-minute loan, CIT executives had warned that the company’s failure would leave small businesses stranded, said Emily Maltby in CNNmoney.com. But in reality, CIT abandoned its borrowers months ago. “Over the past nine months, the onetime financial-services giant has all but ceased making new loans.” One Texas fast-food franchiser has halved its expansion plans, blaming CIT’s disappearance from the loan market.
Retailing: Wal-Mart to assign ‘green’ ratings
Retail giant Wal-Mart will require its suppliers “to calculate and disclose the full environmental costs of making their products,” said Miguel Bustillo in The Wall Street Journal. The green-labeling program, unveiled last week, “could redefine the design and makeup of consumer goods sold around the globe, but also boost costs for suppliers and consumers.” Wal-Mart, which has yet to decide how to distill the environmental information into a form useful to consumers, said it would drop suppliers that did not comply with the program.
Pharmaceuticals: Lupus drug shows promise
Shares in Human Genome Sciences soared this week after the company reported encouraging results in early clinical trials of its anti-lupus drug, said Mike Musgrove in The Washington Post. The drug, called Benlysta, “is designed to target a protein that becomes overactive in lupus patients and can cause the body to attack its own organs.” At present, doctors treat lupus using chemotherapy and steroids, “treatments that can have harsh side effects.” Analysts estimate that an effective lupus drug “could be worth billions of dollars.”
Package delivery: FedEx, UPS clash over unions
Bitter rivals FedEx and UPS are locked in “a dispute that could upset the balance of power in the package-delivery business,” said Alex Roth in The Wall Street Journal. UPS is backing Democrat-sponsored legislation to “place some of FedEx’s drivers and other employees under the National Labor Relations Act, the same law that governs UPS.” FedEx drivers currently operate under a law that makes union organizing difficult, and FedEx often brings up the threat of potential labor disruptions at UPS to win business.
Conglomerates: GE earnings tumble again
The recession is hammering General Electric, which last week announced that second-quarter earnings fell by nearly half from the same period last year, said Jena McGregor in BusinessWeek. Profits at the company’s struggling finance unit were down sharply, not surprising given the environment, “but most of GE’s industrial units suffered, too.” Not only did earnings fall 47 percent, to $2.9 billion, but revenue fell a steeper-than-expected 17 percent, to $39.1 billion. Profits at GE’s NBC unit tumbled 41 percent, as advertising dried up.