CIT's $6bn loan offer from Icahn

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Troubled US bank CIT has been offered a $6bn (£3.7bn) loan from investor Carl Icahn as it tries to avoid bankruptcy.

Mr Icahn said the loan was an alternative to a debt restructuring plan the bank has put forward, which he said favoured large bondholders.

However, some critics say taking the loan would not help CIT trim its debt.

CIT - which lends to small and medium-sized businesses - has been close to bankruptcy since the US government denied it a bail-out earlier this year.

Mr Icahn argued that his loan would save the bank $150m in fees - saying its existing fundraising plan undervalued the firm and would see smaller investors lose out.

Hinderance

But Michael Gallo, of law firm DeCotiis, FitzPatrick, Cole & Wisler, said a loan from Mr Icahn may not be particularly effective.

Carl Icahn loan offer will not solve CIT's problems, says one analyst

"The whole intent of the [debt restructuring] is to reduce debt," Mr Gallo said.

"Replacing a loan with another loan doesn't really do it... It's just forestalling the inevitable."

Because the bank is one of the largest US lenders to retailers, there is a fear that if CIT did collapse, it would hinder the country's recovery from recession, removing a key source of credit for thousands of firms.

If CIT, founded more than a century ago, went bankrupt it would join Lehman Brothers and Washington Mutual on the list of large financial services companies to collapse since the acceleration of the credit crisis in September last year.

But analysts say that if it did fail, it would be unlikely to have the same impact.