Moody's cuts CIT further into junk on liquidity woes

NEW YORK, July 13 (Reuters) - Moody's Investors Service on Monday cut ratings of CIT Group Inc CIT.N further into junk territory and said it may lower them again, citing growing concerns about the lender's liquidity and ability to survive.

The rating agency cut CIT's senior unsecured rating a full four notches to B3, six notches into junk. The rating remains on review for a further possible downgrade.

CIT, which provides financing to small- and medium-sized businesses, has made "inadequate progress" in improving its liquidity position, including in its request for access to the Federal Deposit Insurance Corp's bond guarantee program, Moody's said in a statement.

The company now faces "significant challenges in achieving a funding profile that would provide a stable and cost effective source of funding to support its businesses," it said.

CIT's probability of default has increased and it is possible that it will be forced through major organizational and ownership change, said the agency.

Customers concerned about the company's status may make higher draws on funding commitments, which would further hurt liquidity.

CIT had $5.3 billion in financing and leasing commitments at the end of the first quarter and was sole lender in a large number of those deals.

"The firm's capacity to fund an unexpected increase in loan advances is limited," said the statement. "Longer term, this risk could also further decrease CIT's access to capital and prospects for maintaining franchise viability."

CIT's access to traditional unsecured debt will probably be constrained for the foreseeable future, it said.

CIT shares fell almost 25 percent and its 5 percent notes due in 2014 fell to 48 cents on the dollar from 57 cents on Friday after the company said it is in talks with regulators on ways to bolster its finances if it is refused access to the FDIC's Temporary Liquidity Guarantee Program. (Reporting by Ciara Linnane; Editing by Dan Grebler)