updated 8/17/2009 12:37:46 PM ET 2009-08-17T16:37:46

Commercial lender CIT Group Inc. said Monday its offer to repurchase outstanding debt at a discount — a crucial step to help stave off bankruptcy — was successful.

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The embattled New York-based lender offered to buy $1 billion in debt that was set to mature Monday. CIT warned that if not enough bondholders were willing to sell the debt back to the company, it would likely have to file for bankruptcy protection.

Shares of CIT jumped 10 cents, or 7.1 percent, to $1.51 in midday trading.

The company said nearly 60 percent of the debt was tendered for purchase, barely topping the 58 percent minimum needed to complete the offer. CIT is paying $875 for every $1,000 tendered as part of the offer.

CIT will pay off the remaining notes that matured Monday but were not tendered for purchase as part of the offer.

"The completion of this tender offer is another important milestone as the company continues to make progress on the development and execution of a comprehensive restructuring plan," CIT Group said in a statement.

At the same time that CIT received $3 billion in emergency funding last month from its largest bondholders, it launched the offer to buy back outstanding debt in an effort to ease a cash crunch that nearly forced it out of business. CIT turned to and received funding from its bondholders only after negotiations for a government-led bailout failed.

Despite the completion of the tender offer, CIT is still facing some challenges. It could continue to struggle with liquidity issues as more debt is due to mature next year.

Over the past three months, investors have increasingly worried about a potential failure of the lender, according to a new report from Fitch Solutions, the data and analytics unit of Fitch Group. The report showed CIT's credit spreads — considered a proxy for how risky it is to invest in a company's debt — have widened sharply in the past three months.

Some experts feared that if CIT collapsed it would deal a crippling blow to an economy still bleeding hundreds of thousands of jobs a month despite a nearly $800 billion federal stimulus program.

The retail sector would be hit especially hard. CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing.

Last week, CIT reached an agreement with the Federal Reserve Bank of New York that puts the company under the oversight of federal regulators. The agreement requires CIT to submit a plan for how it will maintain sufficient cash. It must also provide budgets through the end of 2010 that include details about how the company will meet current and future capital requirements.

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