Skadden Arps Slate Meagher & Flom and Paul Weiss Rifkind Wharton & Garrison have taken lead roles in ailing financial services firm CIT Group's negotiations to stave off bankruptcy, reports The Am Law Daily.

Under the terms of the proposal, approved late Sunday (19 July), CIT will receive $3bn (£1.8bn) from some of its largest bondholders. The loan, which has a two-and-a-half year maturity and a relatively high interest rate, is expected to give CIT some breathing room as it embarks on a global restructuring.

CIT's bondholders were advised by Paul Weiss bankruptcy partner Andrew Rosenberg on the negotiations. Assisting him were finance partners Eric Goodison and Terry Schimek and tax partner David Mayo.

News reports have suggested that the company may arrange for a debt-for-equity exchange offer – an offer in which a company exchanges newly-issued debt or equity for outstanding debt securities. A similar offering was made by auto lender GMAC last December in its efforts to avoid defaulting.

Rosenberg, who represented the bondholders committee in GMAC's $28.5bn (£17.3bn) debt-for-equity exchange offer, would not say whether such an offer is being contemplated. "First we have to get through this loan," he said. "Everyone is operating on the assumption that this is the first stage to a global restructuring."

CIT was advised by Skadden partner Martha McGarry, the company's regular outside corporate counsel. McGarry is the firm's CIT relationship partner; in 2007, she represented the company in its $2bn (£1.2bn) acquisition of Citi's US business technology finance unit.

Assisting on the bankruptcy side are Gregg Galardi, who recently handled the Circuit City Stores Chapter 11 filing. He is assisted by Gregory St Clair, who worked on the Refco bankruptcy. Also working on the deal are corporate partner Gregory Milmoe, tax partner Mitchell Solomon, banking partner Sarah Ward and financial institutions partner William Sweet.

Wachtell Lipton Rosen & Katz is advising CIT's board.

CIT became a bank holding company late last year; it then qualified for $2.3bn (£1.4bn) in federal bailout funds. The US Government last week declined to extend any more help to the struggling lender, forcing CIT into the negotiations to avert bankruptcy. Skadden has also been helping CIT to prepare for a possible Chapter 11 filing.

CIT, with assets of $76bn (£46bn), is the twenty-sixth largest bank in the US. If it fails, it would be the first major recipient of government bailout money to fail.

Skadden Arps Slate Meagher & Flom on the Legal Week Wiki