September 1, 2009 / 5:30 PM / 9 years ago

CIT defers interest payment, shares fall

Pedestrians walk past the Cit offices in New York in this July 13, 2009 file photo. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Troubled U.S. lender CIT Group (CIT.N) on Tuesday said it deferred an interest payment on some notes, sending its shares down as much as 17 percent.

The lender to small and medium-sized companies has been battling to avoid bankruptcy as the two-year-old financial crisis triggered a sharp rise in its loan losses and credit costs.

The cash-strapped company said in a filing with the U.S. Securities and Exchange Commission that it cannot pay an interest payment due September 15 to holders of its March 15, 2067 junior subordinated notes.

CIT shares fell to $1.44 from $1.74 in trading on the New York Stock Exchange. The shares had almost doubled in August from 87 cents at the start of the month, amid a broad rally in financial stocks.

Last month, the 101-year-old lender completed a tender offer for $1 billion in debt, buying time to restructure its finances and stave off bankruptcy.

CIT received an order from the Federal Reserve on August 12 to submit a plan for raising capital and meeting debt obligations.

Reporting by Elinor Comlay, editing by Leslie Gevirtz

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