Lexington Herald – CIT Group Inc.’s shares soared Tuesday on a report that hedge fund manager John Paulson is considering merging the troubled finance company with failed mortgage lender IndyMac Federal Bank. But they plunged after-hours as a separate report said CIT is preparing a debt swap offer that could wipe out taxpayers’ investment or could file for bankruptcy protection.

CIT Group, one of the nation’s largest lenders to small and midsize businesses, spent the summer trying to stave off a potential collapse amid mounting loan losses and rising funding costs. It has been devastated by the downturn in the credit markets and is attempting to restructure its operations to remain in business. CIT in the past relied heavily on cheap, short-term debt to fund its operations – a type of funding that essentially evaporated during the peak of the credit crisis last year.

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Tags: bankruptcy protection, collapse, finance company, hedge-fund-manager, john paulson

Reuters – Hedge fund manager John Paulson is considering merging troubled U.S. finance company CIT Group Inc with failed mortgage lender IndyMac Federal Bank, the New York Post said, citing people familiar with the matter.

CIT shares rose 9.6 percent, or 16 cents, to $1.83 in morning trading.

According to the paper, the merger, a plan floated by a number of CIT creditors, including Paulson, is not part of any formal discussions between CIT and IndyMac.

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Tags: finance company, hedge-fund-manager, mortgage-lender