In a repeat of its actions with the Lehman ad hoc committee, PIMCO has now decided to abdicate its role on the CIT steering committee, and sell off its associated holdings. Several questions emerge: the broad public is already aware of the CDS windfall that Goldman stands to reap if CIT ultimately does experience an "event of default" which at this point is a merely formality. So, in a parallel line of thought, just how much is PIMCO hedged to its CIT exposure? And if the answer is "much to quite much", will the combined interests of Goldman and PIMCO to effectively let the company sink be enough to warrant what may otherwise not have been a foregone conclusion on the viability of the company. Furthermore, while part of the Steering committee, how much restricted data was PIMCO privy to? One imagines CIT is a veritable treasure trove full of insights into the lending practices by its millions of customers. Obviously while PIMCO was a committee member, it was unable to trade on this data (right SEC?). Now that it is officially separate from this restriction, an appropriate question would be just what are the limitations in place for preventing it from taking advantage of its huge capital base and all the confidential information it may have gleaned?
From the WSJ:
Bond giant Pacific Investment Management Company has sold its position in a recent emergency loan for CIT Group Inc. as the century-old lender battles to stave off bankruptcy, according to people familiar with the matter.
The move comes as CIT struggles to end months of uncertainty about its future. Pimco was one of six members of a steering committee of CIT's largest bondholders that put in place $3 billion of financing for the company at the end of July.