By Ben Charny
Of DOW JONES NEWSWIRES
SAN FRANCISCO -(Dow Jones)- Dell Inc. (DELL) says its finance division won't be hurt by the bankruptcy of lender CIT Group Inc. (CIT), which Dell uses to administer a material percentage of loans to its customers.
"We're in close contact with CIT, and our understanding is the current bankruptcy will have no impact on its ability to provide funding," Dell spokesman Jess Blackburn said.
Dell, the world's No. 3 computer-seller, remains one of the largest technology providers still doing business with the troubled lender, though Dell has been unwinding its longstanding partnership ever since CIT began to founder. Round Rock, Texas-based Dell says it wants to secure a new banking relationship in the next five or so months.
Dell describes CIT's role as "limited." According to regulatory filings, the lender played a role in nearly a quarter of the $2.4 billion in loans Dell made to customers during the first six months of 2009. Dell says that percentage will decline over time.
Meanwhile, Dell keeps $168 million in restricted cash through July 31 to cover credit losses and fees associated with a private-label credit card, according to terms of its agreement with CIT.
CIT, which lends to nearly a million small and midsize businesses, is trying to rehabilitate under Chapter 11 bankruptcy protection after months of decline.
CIT has support from 90% of voting debt holders for a prepackaged reorganization plan that could allow the lender to speed through Chapter 11 and emerge with a new business model by year's end.
The company says bankruptcy would eliminate $10 billion in debt from lender's balance sheet. CIT has been weighed down by more than $30 billion in bond debt.
Dell shares were down 14 cents to $14.32 while CIT was down 63% to 27 cents in recent trades.
- By Ben Charny, Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com