Will CIT's reputation survive?

NEW YORK -- A Chapter 11 bankruptcy filing usually means the end of the road for financial companies since they rely so heavily on customer trust. CIT Group Inc. is hoping that its case will be different.

The commercial lender's trip through reorganization may well be speedy given that it's already reached agreements with creditors on restructuring its debt. But the real test will come from CIT customers, who could decide to take their business elsewhere.

"Their image is tarnished right now," said Len Blum, a managing partner at investment bank Westwood Capital. "They have an uphill climb because they are only worth the value of the portfolio," Blum said of CIT's pool of loans it has extended to customers.

Just as a bank would fail if all of its depositors tried to get money out at the same time, CIT wouldn't be able to survive if too many of its customers close their accounts. Some already have been pulling their business in recent months as CIT struggled for survival, but it's still too early to know how many will remain.

CIT is one of the nation's biggest lenders to small and mid-sized businesses, providing financing to an array of retailers, energy companies, a small movie studio, and operators of Dunkin' Donuts stores.

One factor playing in CIT's favor is that tight lending conditions would make it tough for customers who wanted to leave. CIT also provides specialized types of financing services that relatively few competitors offer.

"Without many alternatives in place, and an environment of risk adversity, they still have a place in the market," said Scott Stuart, a senior managing director of bankruptcy management services firm Donlin Recano & Co.

Even with those advantages, analysts say it's still anyone's guess whether CIT can pull it off.

"The reputational risk is significant," said Hal Reichwald of the law firm Manatt Phelps & Phillips. "Ultimately that will result in a much smaller company."

CIT filed for bankruptcy protection Sunday after teetering on the brink of collapse for months. The company ran into trouble as rising costs to finance