CIT Group Inc
CIT, however, also asked bondholders to approve a prepackaged plan of reorganization that would allow it to initiate a voluntary filing under Chapter 11 if the debt exchange failed.
The lender, founded more than a century ago, said around a third of its bondholders agreed to participate in the exchange offer or vote for the prepackaged plan of reorganization.
Under the terms of the exchange offer, a tendering holder of an existing debt security would receive a pro-rata portion of each of five series of newly issued secured notes, with maturities ranging from four to eight years, and/or shares of newly issued voting preferred stock, CIT said.
The exchange offers are conditional upon achieving a debt reduction of at least $5.7 billion in aggregate, with specific targets for the periods from 2009 to 2012.
The exchange offer expires on October 29.
We believe this plan ... can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process, Chief Executive Jeffrey Peek said in a statement.
CIT, which serves almost one million small and mid-sized companies, said the plan has been approved by its board of directors and by a committee of bondholders.
CIT's problems emerged in recent years following Peek's idea to tap into potentially profitable but risky businesses such as subprime mortgages and student loans.
The financial meltdown triggered a sharp rise in CIT's loan losses and credit costs, leaving the company on the verge of collapse. The lender to businesses from retailers to sport teams has lost close to $5 billion since the end of 2007.
For the 12 months ending August 31, 2010, CIT's unsecured debt funding needs are about $7.6 billion. The financial company has about $40 billion of long-term debt.
CIT's longer-term plan is to essentially turn itself into a bank. The company is one of scores of lenders and underwriters that relied on bond markets to fund their operations, only to suffer as the credit crunch has raged for two years.
In a regulatory filing, CIT said it expects to seek permission to transfer certain business platforms into its CIT Bank unit within 12 to 18 months after the completion of its restructuring.
It plans to diversify the bank's funding base by adding commercial and retail deposits, it said.
CIT received $2.3 billion in December under the government's Troubled Asset Relief Program (TARP), but federal regulators this year rejected requests by CIT for more help.
The Obama administration also declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.
CIT shares closed down 15 cents, or 12.4 percent, at $1.06 on Thursday. (Reporting by Dan Wilchins and Paritosh Bansal; Additional reporting by Jennifer Ablan, Walden Siew and Juan Lagorio; editing by Andre Grenon and Muralikumar Anantharaman)