Icahn Nets a Win, as CIT Shakes Up Board - TheStreet

Icahn Nets a Win, as CIT Shakes Up Board

CIT Group, under fire from financier Carl Icahn, has agreed to shake up its board if bondholders vote for a proposed restructuring proposal.
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Update includes CIT's amended proposed reorganization plan

NEW YORK (

TheStreet

) --

CIT Group

(CIT) - Get Report

announced it had amended its proposed reorganization plan to allow for an immediate shakeup of its board of directors if bondholders vote for the proposal.

The amendment signals efforts by financier Carl Icahn to oust the board appear to be winning favor with bondholders, even though, in an earlier release Wednesday, CIT sniped at a financing plan Icahn had proposed a day earlier.

CIT is trying to cut its debt and has floated a pair of proposals to bondholders, including an out-of-bankruptcy restructuring and a prepackaged bankruptcy plan, which they must approve by Oct. 29. Both plans have met with resistance, however, most vocally from Icahn, who came seemingly out of nowhere earlier this month with a claim that he is CIT's largest lender, and began firing off letters criticizing the company's board for a host of decisions, including a loan it arranged with

Goldman Sachs

(GS) - Get Report

last year.

CIT's board was to face an election in May 2010, but that was apparently not soon enough for some bondholders, including Icahn, CRT Capital analyst Kevin Starke

told TheStreet.com last week

.

Also on Wednesday, CIT announced it had borrowed an additional $4.5 billion from what it said was "a diverse group of lenders, including many of the company's bondholders," according to a company press release.

CIT has been scrambling to cut its debt following a funding crisis begun in earnest after it was denied access to a government program that guaranteed the debt of larger lenders, including

General Electric

(GE) - Get Report

and large banks like

Citigroup

(C) - Get Report

,

Bank of America

(BAC) - Get Report

and

Wells Fargo

(WFC) - Get Report

. Bondholders have until midnight Oct. 29 to agree on the proposed debt exchange, or some type of bankruptcy filing appears likely.

-- Written by Dan Freed in New York

.