CIT Now a Game of Chicken

NEW YORK (TheStreet) -- A CIT Group(CIT Quote) bankruptcy filing looks like it would benefit few if any of the parties involved, and yet it remains a very real possibility for the troubled lender.

As of late Wednesday, media reports said the most likely resolutions expected to come of Thursday's deadline for CIT to restructure more than $30 billion in debt were a swap to eliminate at least 30% of that debt load by giving bondholders new equity, or else seeking bankruptcy protection, either through a prepackaged plan, which the company has reportedly already put in place, or a conventional filing that would put the reorganization in the hands of the courts.

Despite the deadline, there was no announcement from CIT as of midday. A Bloomberg News report Thursday said CIT will present a plan for a debt exchange to its board "as soon as this week," suggesting it may miss the deadline. A company spokesman declined to comment on the timing of an announcement.

The decision by CIT to draw up the prepackaged bankruptcy plan can be viewed as an attempt to put some degree of pressure on its bondholders to reach terms with each other and the company's board on a debt-to-equity swap.

One prominent restructuring adviser who says he is not involved in the CIT case says a bankruptcy filing would be "suicidal," since finance companies depend so heavily on the confidence of customers, creditors and other parties. He also noted a bankruptcy filing might allow certain parties to break contracts with CIT that could be harmful to the company.