Billionaire investors Carl Icahn said on Tuesday he will offer smaller holders of CIT Group's debt short term protection against the value of the debt declining, if investors back his alternative restructuring of the beleaguered lender.

New York-based CIT is trying to restructure its debt by getting debtholders to exchange their notes or to agree to a prepackaged bankruptcy.

Icahn, who has bought up CIT debt in the past few months, has criticized CIT's restructuring plans and proposed alternatives. He said last week he has offered to underwrite a $6 billion loan to CIT.

On Tuesday Icahn said he would offer smaller debtholders, who he said have been shut out of negotiations, the option to sell their debt to him for 60 percent of their par value within 30-days of CIT's exchange failing, if they vote against CIT's proposed restructuring.

Our tender offer provides downside protection to those noteholders willing to stand up to the company and reject their plan in the face of the scare tactics being used by the company, he said in a release.

Icahn said that CIT's proposed restructuring will destroy the value of the company and that the current Board of Directors should not be able to retain control of the company.

I believe that CIT's offer as currently structured provides no protection for noteholders going forward and is likely to result in the deterioration of value and business as usual for the current Board of Directors and management, he said.

CIT on Monday extended and sweetened its debt exchange offer to some of its bondholders in an effort to get more participation.

(Reporting by Karen Brettell;)