"Commercial lender CIT Group filed for bankruptcy protection on Sunday afternoon after getting "overwhelming support" from its debt holders.
The pre-packaged bankruptcy was widely expected after billionaire investor Carl Icahn last week threw his support behind a bankruptcy filing.
None of CIT’s operating subsidiaries, including CIT Bank, a Utah state bank, will be included in the filing, CIT said in a statement, allowing them to operate as normal while the case is pending.
“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said Jeffrey M. Peek, Chairman and CEO. He added that the measure is aimed at a "swift emergence" from bankruptcy protection.
On Friday, shares of cash-strapped CIT [CIT 0.72 -0.23 (-24.21%) ] slumped 22.5 percent to 73 cents on, after being halted for the news, as investors took the announcement as an indication that the pre-packaged bankruptcy plan would go ahead.
Icahn, who says he is CIT's largest bondholder, said in a statement that he changed his mind on the pre-packaged bankruptcy plan because he was pleased by changes the company made, including establishing an accelerated process for appointing new directors.
Also Friday, CIT said it had reached an agreement with Goldman Sachs Group that would reduce a $3 billion credit line to $2.125 billion but, critically, keep the line open during a bankruptcy.
CIT has about $65 billion in liabilities through mid-June and $800 million of debt coming due next week." Copyright 2009 Reuters.
