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NEW YORK CITY-CIT Group filed for Chapter 11 Sunday in the US Bankruptcy Court here. The filing will reduce the lender’s total debt by $10 billion. With a total filing for approximately $71 billion this registers CIT Group as the fifth-largest bankruptcy in US history with the dubious honor of placing between General Motors’ $91.5-billion Chapter 11 and Enron’s $65.5-billion filing.

“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” chairman and CEO Jeffrey M. Peek says in a statement.

The lender’s financials took a dive as more and more of its loans defaulted, leaving it a lender with an inability to lend. The mounting debt topped out around $31 billion. CIT then expanded its senior secured credit facility by $4.5 billion maturing in 2012, mostly from bondholders.

The lender had prepared a pre-packaged reorganization, which caused a public and private battle with self-purported largest shareholder Carl Icahn. After some changes to the reorganization plan, Icahn then changed his vote and offered $1 billion to help buoy the lender.

On Friday, CIT issued a statement, saying: “We are pleased to have reached this agreement with Mr. Icahn. Our ability to secure an incremental $1 billion committed line of credit from Mr. Icahn’s affiliates supports our restructuring plan and helps ensure our ability to continue to serve our existing small business and middle market customers.”

CIT Group picked up $2.3 billion from the US’s Term Asset Relief Program. CIT’s operating subsidiaries were not included in the filing. The vote for the plan was passed with 90% of the votes from participating shareholders. The lender plans to be out of bankruptcy by the end of the year.

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