In what would appear a leonine agreement, GS obtained that if the company was to go bankrupt or the the credit facility was ended, it would receive about 1 Bn $ over more than ten years. In order to avoid bankruptcy, CIT is trying to negotiate an agreement with its bondholders and sought as well to renegotiate this agreement with GS. Unsurprisingly, these discussions have not been successful so far.

Goldman Sachs Group Inc. is set to earn about $1 billion in the event CIT Group Inc. enters bankruptcy or otherwise ends a $3 billion financing agreement, according to a person familiar with the matter who declined to be identified because the payout hasn't been disclosed.The payout would cover fees from a 20-year agreement signed June 6, 2008, according to regulatory filings. Under the deal, CIT agreed to pay Goldman 2.85 percent of the maximum amount lent under the facility, or $85.5 million annually for the first decade and then a declining amount after that, the filings show.

"This would not be a windfall payment," Goldman Sachs said in a statement today. "The make-whole payment, which was publicly disclosed at the time of the financing, is simply the present value of the spread to be earned over the life of the facility."

CIT Chief Executive Officer Jeffrey Peek is seeking to modify as much as $29 billion in debt, asking bondholders to swap unsecured obligations for new secured debt and preferred shares, in an effort to avoid bankruptcy. The company turned to bondholders in July for $3 billion in rescue financing after failing to win a second U.S. bailout.

CIT is in talks with Goldman to amend the facility, but no agreement has been reached, according to an Oct. 2 CIT filing. The Financial Times reported the payout earlier today, without saying where it got the information.

If the debt exchange fails to win agreement from bondholders, CIT will seek court protection through a pre-packaged bankruptcy, the company said Oct. 1. CIT, which finances about 1 million businesses from Dunkin' Brands Inc. to Eddie Bauer Holdings Inc., posted a second-quarter loss of $1.62 billion as more customers defaulted on loans.

Credit Agreement

Goldman Sachs provided the credit facility last year after CIT was cut off from the commercial-paper market, its traditional source of funding. The maximum amount of the facility declines by $300 million each year after the first 10, the filings show.

Goldman Sachs spokesman Michael DuVally declined to comment beyond the company's statement. An e-mail to CIT spokesman Curt Ritter wasn't immediately returned.

CIT is boosting its board to 13 members from 10, and replacing some directors who may step down, according to an Oct. 2 regulatory filing. A bondholder steering committee will recommend candidates, who must be approved by the Federal Reserve Bank of New York, CIT said.

The plan to expand the board means CIT may be preparing to remove Peek, according to corporate governance experts. Peek, 62, joined CIT in 2003 after being denied the top job at Merrill Lynch & Co.

CIT's board extended Peek's employment contract last month, keeping him at the helm until at least Sept. 2, 2010, according to a Sept. 4 filing. Peek earned $800,000 in base salary last year, and stock and option awards helped bring his total compensation to $5.4 million, according to CIT's proxy statement.