Tyco

(TYC)

suffered another setback Tuesday as the IPO of its

CIT

(CIT:NYSE) finance business fetched a lower-than-expected price.

Shares of CIT were priced late Monday at $23, $2 below the minimum price Tyco executives were looking for and considerably under the $29 price the company had hopefully estimated in registration documents. The IPO comes just about a year after Tyco, in the middle of an acquisition binge, paid $9.2 billion in stock to buy CIT.

Wall Street insiders say concerns about Tyco's myriad problems, and the fact that the CIT deal is being pursued to rebuild Tyco's balance sheet rather than to fuel CIT's growth, depressed demand for the

widely watched deal.

With the lower-than-expected price, the 200-million-share offering will bring in gross proceeds of $4.6 billion, rather than the $5 billion most observers were expecting. That reduced sum could complicate Tyco's plans to restructure about $4 billion in debt. CIT isn't getting any proceeds from the IPO, though the slew of investment banks underwriting the offering will take a sizable chunk.

Tyco rose 24 cents during regular trading Monday to close at $13.75, as investors crossed their fingers and hoped the CIT deal would ease Tyco's persistent liquidity problems. The stock was mostly flat in after-hours trading.

David Menlow, president of IPOfinancial.com, an IPO tracking service, says the reduced price for CIT shares is due mainly to the dim view many Wall Street institutions have of Tyco. He says that since CIT isn't getting any of the proceeds from the offering, investors weren't especially keen to funnel more money toward Tyco.

Tyco shares have plunged some 70% this year as the cash-strapped conglomerate has been hit by investor concerns about the quality of its accounting and its corporate strategy. CEO Dennis Kozlowski departed this spring as he was being indicted in New York on sales tax-evasion charges, not long after the company reversed an early-year plan to split into several independent business units. Tyco has some $7.7 billion of debt coming due within the next year and a half and briefly pursued the splitup plan in an effort to raise cash to pay down that debt.

Ironically for CIT shareholders, Menlow says the reduced offering price could actually prove a good thing, as it puts an "interim cap on how low this stock can go." Before Tyco bought CIT, the firm had a good reputation on Wall Street as a lender to so-called middle-market businesses and to consumers. Many observers say once CIT puts some distance between itself and Tyco, it quickly will regain that reputation.