Can CIT make it? Not without new structure

By Chelsea Emery - Analysis

NEW YORK (Reuters) - CIT Group Inc appears to have avoided a costly and disruptive bankruptcy filing for now, but many restructuring experts see little chance that the company will survive in its current form.

The lender to small and midsized businesses has managed to obtain $3 billion in rescue financing from a group of bondholders after it ceased getting loans from its regular lenders, according to a source close to the matter. But, even so, the company's future prospects are dim.

"Some new organization has to emerge. CIT's current business model is broken," said Michael Goldsmith, a managing director at financial advisory firm BBK.

CIT provides loans to roughly 1 million customers, playing an indispensable role for many companies that cannot easily obtain affordable financing from large banks.

The company began to founder when the commercial paper market seized up in 2007, cutting off a critical source of funding to many companies with less-than-pristine credit.

CIT had earlier made what proved to have been an ill-advised plunge into subprime mortgages and student loans, causing the company to rack up enormous losses as the economy and credit environment soured.

"When you can't tap into your traditional forms of funding, how do you stay alive as a viable entity?" said BBK's Goldsmith.

A NEW MODEL?