As previously reported on GlobeSt.com, CIT has been working tocutexpenses and reduce staff due to recent market conditions.The company took a heavy hit through subprime losses and reported aloss of $130.7 million in the fourth quarter of 2007, primarilyrelated to charges on the home lending and student lendingbusinesses.

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"Over the past several quarters, the senior management and theboard of CIT have been focused on ways to improve our performancein the current challenging environment," said Jeffrey Peek,chairman and CEO of CIT during an investor conference call. "Muchof this effort has been directed towards reducing the overhang ofour mortgage exposure."

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According to Peek, CIT made the decision to divest its homelending business a year ago, and the company received severalinquiries about the portfolio. After a two-round bidding process,CIT decided to sell to Lone Star, due to the buyer's willingness tonegotiate on price and terms.

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"The sale is at a significant discount to the unpaid principalbalance of these assets, but we think the price is fair given theperformance of the portfolio, the overall housing market and therange of possible outcomes we modeled for the portfolio goingforward," Peek explained.

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Peek pointed out that the sale represents several benefits forCIT. Perhaps the most important is the fact that it allows thecompany to dispose of a liquidating portfolio and will allow it tofocus on its more profitable core business of commercial financefranchises. In addition, the infusion of nearly $2 billion in cashfrom the two transactions is expected to improve the company'sliquidity position and gives CIT more financial flexibility.

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The company is expected to record a loss in the current quarterof approximately $2.5 billion. The sale itself represents anapproximate total loss of $2 billion, according to CIT's vicechairman and CFO, Joseph Leone, who also spoke during theconference call.

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"The CIT board, senior management and I all agreed that theaction we're taking today is clearly in the best interest of allCIT stakeholders," Peek concluded. "While one never likes torecognize a loss on the sale of a business, we are pleased we wereable to execute a deal of this magnitude and nature in the currentchallenging environment."

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CIT, which is headquartered in Livingston, operates one of itstwo home lending servicing centers in Marlton, NJ. The Marltoncenter and the second center--in Oklahoma City, OK--together employapproximately 300 people. Peek did not mention whether or not theworkers would stay with the servicing centers, and calls to CITseeking further comment were not returned as of deadline. Lone Stardeclined to comment on the transaction or its future plans for thebusiness.

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