CIT Shares Jump as Lender Seeks Rescue Financing

A pedestrian past the the CIT Group Inc. building in New York, Wednesday July 15, 2009. The Obama...

A pedestrian past the the CIT Group Inc. building in New York, Wednesday July 15, 2009. The Obama administration drew a line in the sand on financial bailouts Wednesday by denying emergency aid to CIT Group Inc., a struggling commercial lender on the brink of bankruptcy. (AP Photo/Bebeto Matthews)

(AP)

CIT Group Inc.'s shares nearly doubled Friday as the commercial lender held talks with several large banks about securing emergency financing in hopes of avoiding a bankruptcy filing.

But the company's stock remains well below $1 — and down 54 percent from only a week ago — suggesting investors still rate its prospects of survival as slim after the federal government refused to rescue the firm.

CIT is in talks with JPMorgan Chase & Co., Goldman Sachs and Morgan Stanley about receiving short-term financing that may help it avoid filing for Chapter 11 protection, a person familiar with the talks told The Associated Press. The person spoke on condition of anonymity because the talks are confidential.

CIT has been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company, one of the nation's largest lenders to small and midsize businesses.

Another option under discussion is for the banks to give CIT financing under a Chapter 11 bankruptcy proceeding, according to the source. That would allow the company to restructure under court protection and would ease fears about restricting access to credit for thousands of small retailers, manufacturers and other businesses.

CIT's stock jumped 29 cents to close at 70 cents after rising as high as 93 cents earlier in the day.

"It looks like they're doing everything they can to avoid bankruptcy," said longtime banking analyst Bert Ely.

But there is no guarantee an agreement will be able to save the ailing company, which is teetering on the brink after rescue talks with government regulators broke off late Wednesday after days of round-the-clock negotiations. The New York-based bank faces $7.4 billion in debt due in the first quarter of next year.

Highlighting its woes, CIT was removed from the Standard & Poor's 500 index Friday and replaced with software distributor Red Hat Inc.