NEW YORK, USA - CIT Group Inc, a century old commercial lender, filed for bankruptcy on Sunday, as the global credit crisis left it unable to fund itself and the recession left it with too many bad loans.

CIT's creditors have already approved its reorganization plan. Analysts have said that getting through bankruptcy is crucial for CIT if it wishes to keep its customers, which include Dunkin' Donuts franchisees and film production company Dark Castle Entertainment.

CIT's operating subsidiaries, including CIT Bank, are not included in the bankruptcy filing, and expect to continue operating, the company said in a statement.

CIT, which filed for bankruptcy protection in the Southern District of New York, plans to reduce its total debt by about $10 billion in bankruptcy.

Under the bankruptcy plan approved by bondholders, creditors will end up owning the company. Most bondholders will also end up with new CIT debt worth about 70 per cent of the face value of their old debt. Preferred shareholders, including the U.S. government, will get money only after other creditors are paid back. Current common shareholders will receive nothing.

The U.S. government invested US$2.33 billion in CIT preferred shares in December 2008 through the Troubled Asset Relief Program.

CIT financed itself mainly by borrowing from bond markets, which has proven to be a flawed strategy as the credit crunch that began in 2007 has made it much more expensive for troubled companies to fund themselves.