CIT in talks with JPMorgan, Goldman: source

By Paritosh Bansal and Jennifer Ablan

NEW YORK (Reuters) - CIT Group Inc CIT.N is in talks with JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N) about short-term financing as it looks for ways to avoid bankruptcy, a source close to the company said on Friday, sending the lender's shares and bonds up.

Bankruptcy, however, is still possible over the next few days, and CIT, a 101-year-old lender that services nearly one million small- and mid-sized businesses, is continuing to talk with regulators about the situation, the source said.

Financing talks have turned primarily to arranging for a debtor-in-possession (DIP) loan for the lender in case of a bankruptcy, CNBC reported, adding that talks were also continuing for financing out of court.

JPMorgan and Morgan Stanley were in talks with other banks about a DIP loan, Bloomberg reported.

Meanwhile, CIT's bondholders were going to hold another conference call on Saturday, a source in the lender's bondholder group said.

"They haven't thrown the towel, and they still are trying to work very hard to get some sort of funding, but at the end of the day I still think that there is a very high risk of a bankruptcy event," said Sameer Gokhale, an analyst at KBW.

CIT is in search of $2 billion to $3 billion of financing, according to the source, who declined to be identified because the talks were private. The company also is in talks with bondholders about a debt for equity swap, the source said.

But the source in the bondholders' group said many bondholders were pursuing a "debt for new debt" exchange and that a debt for equity exchange was not a real consideration.