Riversource, Fidelity may have biggest CIT losses

NEW YORK (Reuters) - RiverSource Investments Inc and Fidelity could face some of the biggest losses from stock holdings in CIT Group Inc if the hard-hit commercial lender declares bankruptcy.

As last-ditch talks this week to secure U.S. government rescue financing for CIT collapsed, escalating fears about a Chapter 11 filing caused some of the company's debt to plunge to 52 cents on the dollar on Thursday.

Common shares in the century-old finance company, already down 91 percent this year, dropped $1.22 to 43 cents.

Yet even the biggest CIT investors would not suffer major losses, analysts said.

"I would guess most of those funds have sold most of their stock by this point," said Morningstar research director Russell Kinnel.

Fitch Ratings and analysts say bankruptcy is the most likely scenario. In that case, CIT debt would be worth as little as 24 cents on the dollar, and shareholders would be wiped out.

RiverSource, a money management unit of Ameriprise Financial Inc, reported holding more than 44.3 million CIT shares at the end of June, giving it an 11.4 percent stake, according to a Securities and Exchange Commission filing.

FMR, a Fidelity company, told the SEC it held 37.4 million CIT shares, or a roughly 10 percent stake, at the end of February. That stake declined to 29.5 million shares, or 7.6 percent, at the end of March.

Brandes Investment Partners LLP, a San Diego firm managing more than $42 billion, was CIT's third-largest holder, according to Reuters Knowledge. Brandes in February reported to the SEC that it held 28.5 million shares.

Lipper, a Thomson Reuters company that supplies mutual fund information, analytical tools and commentary, said Brandes sold nearly all its CIT shares by March 30. Officials from these three firms did not return calls seeking comment.

Regulatory filings offer a snapshot of investment manager holdings, which can change quickly. The ownership reports also do not reflect any offsetting hedges.

CIT, a New York-based commercial lender, has been on a long, steady decline since June 2007, when the credit crunch took hold and prevented non-banks like CIT from accessing new funds from the market.

It is little surprise that RiverSource's Diversified Equity Income, the fund with the biggest investment in CIT, valued that stake at just $30.2 million.

A little known Philadelphia fund manager, Academy Asset Management LLC, may have made the biggest bets on CIT. Its $2.7 million Academy Select Opportunities Fund had the biggest exposure to CIT at 14.5 percent of its portfolio in March, according to Lipper.

Philadelphia-based Academy said that exposure fell to 11 percent by June 30.

Academy's Core Equity Fund ranked third with 3.2 percent of its portfolio invested in CIT on March 30. Officials at Academy could not be reached immediately for comment.

SunAmerica Focused Small-Cap Value Portfolio, a fund sold by American International Group Inc's SunAmerica unit, had the second-largest portfolio exposure with 5.2 percent, Lipper said.

William Miller's Legg Mason Opportunity Trust, which has rebounded strongly this year, reported a roughly $20 million CIT investment at the end of March, but that represents less than 2 percent of the fund.

(Reporting by Joseph A. Giannone and Jennifer Ablan; Editing by John Wallace)