By Alistair Barr, MarketWatch SAN FRANCISCO (MarketWatch) -- CIT Group shares slumped more than 15% Friday as the possibility of bankruptcy loomed larger for the troubled lender. CIT /quotes/comstock/13*!cit/quotes/nls/cit (CIT 0.79, -0.16, -16.85%) said in a regulatory filing Friday that its $3 billion lending facility with Goldman Sachs has been cut to $2.125 billion. The lender said it paid a termination fee of $285 million to Goldman, and posted another $250 million of collateral, for effectively scrapping the unused part of the facility. Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 172.09, -6.49, -3.64%) agreed to waive its right to terminate the remaining facility if CIT files for bankruptcy, according to the filing. CIT also said it got a new $1 billion line of credit from activist investor Carl Icahn. The company can borrow from the line on or before the end of this year. It can still access the money if it files for bankruptcy, CIT added in a statement CIT, a major lender to small and medium-sized businesses, has been struggling to avoid collapse since the recession triggered billions of dollars in loan losses and the financial crisis cut the company off from its main source of financing. Earlier this month, CIT unveiled two different reorganization plans. One involved exchanging some debt, while the other was a voluntary pre-packaged restructuring. Debt holders had until the end of Thursday to vote. CIT said Friday that once the votes are counted, its board of directors would decide what to do next. Icahn said Friday that he's voting for CIT's pre-packaged reorganization plan. That's a big change from earlier in the month, when the activist investor criticized the company's proposals. "We are pleased that CIT has made a number of changes as a result of our labors," Icahn said in a statement. "Most importantly, CIT has now agreed to give control to the noteholders." "Since CIT first launched its plan we have been very vocal, both publicly and privately, about the plan's deficiencies and our proposed solutions," he added. "The company has since made a number of modifications to the plan, which we believe protect noteholders and will likely provide a greater recovery on their investment" CIT shares slumped 16% to 79 cents in afternoon trading. "We are trimming our target price by $0.50 to $1.50 to reflect continued pressure on shares as the company restructures itself, and bankruptcy remains in the scope of management's plans," Matthew Albrecht, a financials analyst at Standard & Poor's Equity Research, wrote in a note to investors Friday. Alistair Barr is a reporter for MarketWatch in San Francisco. http://www.marketwatch.com/story/...oms-2009-10-30?amp%3Bsiteid=yhoof |
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