CIT Group files for bankruptcy

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New York: The century-old American lender CIT Group has filed for bankruptcy, the fifth largest in the country's corporate history by assets at USD 71 billion.

CIT, which finances small and middle market businesses, has sought bankruptcy protection after the failure of its planned debt-exchange offer with bond holders.

The bankruptcy, which reflects the continuing credit woes in the US economy, is the largest following that of Lehman Brothers, Washington Mutual, Worldcom and General Motors.

Going by estimates, only four entities had more assets than CIT, when they went bankrupt.

According to the court filing, CIT had total assets worth USD 71 billion while the liabilities stood at USD 64.9 billion, as on June 30, 2009.

At the time of bankruptcy, Lehman had assets to the tune of USD 691 billion, Washington Mutual (USD 328 billion), World Com (USD 104 billion) and General Motors (USD 91 billion).

Interestingly, four of the five bankruptcies Lehman, Washington Mutual, General Motors and CIT have happened in the wake of the financial meltdown.

In a statement on Sunday, CIT said the company and one of its subsidiary, has filed for "prepackaged" reorganization with support of its debt holders and Board's approval.

Following the reorganisation, the company expects to lower its debt by about USD 10 billion.

To tide over the financial meltdown, the US had pumped in billions of dollars into CIT.

"None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, will be included in the filings. As a result, all operating entities are expected to continue normal operations during the pendency of the cases," CIT noted.

CIT's Chairman and CEO Jeffrey M Peek said the decision to proceed with the re-organisation would allow the company to continue to provide funding to small business and middle market customers.

Last month, CIT received credit line worth USD 4.5 billion from a diverse group of lenders. Separately, it had entered into an agreement with billionaire-nvestor and major bond holder Carl Icahn, whereby the company would be getting USD 1 billion credit line.