CIT Working With Bankruptcy Adviser

Mae Anderson, AP Business Writer

NEW YORK -- CIT Group(CIT Quote) is working with a premier bankruptcy firm as the troubled commercial lender awaits word on whether it will receive funds from a federal program designed to help banks, the company confirmed Saturday.

The New York-based company has engaged Skadden, Arps, Slate, Meagher & Flom LLP, which has a prominent bankruptcy practice. The hiring was first reported in The Wall Street Journal Saturday.

However, acccording to the company CIT has worked with Skadden for "several years."

"Skadden is one of the principal law firms representing CIT," company spokesman Curt Ritter said in an email response to an AP query. "They represent the firm on a wide variety of corporate matters. CIT will not comment on any specific aspect of their engagement."

Skadden did not return calls for comment.

The financier to small and mid-sized businesses is facing a liquidity crisis absent help from the government, according to analysts.

Shares of CIT closed Friday down 18% on heavy trading volume over uncertainty over federal aid.

CIT is awaiting word on whether it will receive funds from the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, which lets cash-squeezed companies issue government-backed bonds to raise capital at a lower cost. As of June 8, the program has backed $335.4 billion of debt.

FDIC Chairwoman Sheila Bair has said that the program tries to be inclusive but applicants must meet certain requirements. Generally, the program gives preference to companies with high credit ratings or that are considered pivotal to the overall economy. Ritter said Friday the company's application to the FDIC program remains outstanding.

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