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Monday, October 19, 2009

CIT Group warns it still might face bankruptcy even if amended debt exchange is completed

Struggling lender CIT Group is warning that it might still file for bankruptcy even if it completes a revised debt restructuring plan, according to a regulatory filing Monday.

The New York-based lender to small and midsize businesses is trying to slash its near-term debt burden.

On Friday, it sweetened the restructured exchange offer to current bondholders as it tries to ensure the offer's success. The revised offer gives bondholders a better interest rate and shorter maturities on new debt.

The revised offer would also give the government a 5.4 percent stake in the lender, up from a proposed 2.4 percent under the original plan. The government provided CIT Group $2.3 billion in loans last fall amid the peak of the credit crisis.

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