According to an article in the Star-Telegram, CIT Group Inc., is asking bondholders to approve a prepackaged reorganization plan in case it is forced to file for Chapter 11 bankruptcy protection.

The article said:

“The troubled New York-based lender had launched the restructuring effort Oct. 1 with the hope that it will trim at least $5.7 billion from its near-term debt.”

CIT Group, which has received $2.3 billion in federal bailout money last fall and a $3 billion emergency loan in July from some of its largest bondholders has been at risk for bankruptcy since the credit crunch began and its borrowing costs have become larger than its income.

A CIT Group bankruptcy could have devastating effects on the retail industry which depends heavily on credit provided by this company. If CIT Group is not able to find buyers for its loans during a bankruptcy, the company’s current borrowers might be forced to find financing elsewhere which could prove nearly impossible. Many retailers are jittery, some even considering using as much of their credit lines as possible which could in affect put more pressure on this nearly bankrupt lender.