UPDATE 1-Goldman Sachs, CIT in talks to amend loan terms-WSJ

(Adds Goldman comment, paragraphs 4-5)

NEW YORK Oct 5 (Reuters) - Goldman Sachs Group Inc (GS.N) Inc said on Monday that it is in talks to amend the terms of a $3 billion loan to CIT Group Inc (CIT.N), the Wall Street Journal reported.

The investment bank is expected to receive about $1 billion if commercial lender CIT were to file for bankruptcy, the Wall Street Journal said. This is a point of contention as the company battles to raise additional funds as part of its broader restructuring plan, the Journal said.

CIT is studying several options for the loan from Goldman Sachs, one of which is trimming the $1 billion payment, the Journal said, citing a person familiar with the situation.

"Goldman Sachs is working with CIT and its creditors to enable it to continue to use the facility, which we believe gives it an attractive cost of funding, particularly relative to the other financing that has been provided to CIT at less attractive levels," Goldman Sachs said in a press release on its website.

Goldman spokesman Michael DuVally declined to comment further.

CIT spokesman Curt Ritter declined to comment on the report.

Goldman extended $3 billion in funding to CIT in June 2008, according to regulatory filings. The 20-year contract, which was set as the credit markets froze, calls for CIT to pay Goldman 2.85 percent of the maximum amount lent.

That translates to about $85.5 million a year for the first 10 years of the agreement, the Journal said, and CIT would be required to pay $1 billion if it were to file for Chapter 11 bankruptcy.

Citing a Goldman Sachs internal memo, the Wall Street Journal the financing for CIT required the bank to "establish long-term funding" of its own, which it is obligated to pay even if the CIT facility is paid off early or CIT files for bankruptcy.

The $1 billion payment is "designed to cover Goldman Sachs in such an event," according to the memo.

CIT, a century-old company that is one of the largest lenders to thousands of small and medium-size businesses, pays roughly 10 percent interest on its latest loan. Goldman's loan, made before CIT acknowledged massive financial problems, charges about 3 percent interest, the Journal said. (Reporting by Ilaina Jonas; Additional reporting by Steve Eder; Editing by Gary Hill)