By Mike Spector, Kate Haywood and Aparajita Saha-Bubna

CIT Group Inc. (CIT) has prepared a prepackaged bankruptcy in the event its proposed debt restructuring doesn't get the required bondholder participation, said two persons familiar with the matter.

The details of the prepackaged bankruptcy will be shared with investors along with the debt restructuring plan, said the people familiar with the matter. Investors will have to decide whether to tender their bonds or to take their chances in bankruptcy court. They also have the option to vote on the prepackaged bankruptcy.

The struggling lender has previously warned investors that a bankruptcy filing as a means of restructuring the company is one option for CIT.

"A threat isn't a threat unless you're willing to follow through," said one of the people.

The embattled lender to nearly a million small and midsize businesses is readying a sweeping exchange offer to bondholders holding about $31 billion in debt, these people said. The exchange would aim to get bondholders to push out their maturities and exchange existing debt for new secured debt and equity in a restructured company.

At the same time, CIT is also soliciting approval from bondholders for a prepackaged bankruptcy, a move the company is prepared to make if the exchange offer fails, these people said. In bankruptcy, companies are on solid legal footing to get a plan approved if creditors holding at least two-thirds of outstanding debt agree.

One person described the approach as "two roads" toward deleveraging CIT's balance sheet. Another person said the company remained concerned about "holdouts" in the exchange offer. An exchange is "the best way to do" the restructuring, this person said, but if bondholders "don't want to do it that way, [CIT will] do it the other way."

As part of the plan, CIT will also seek other new financing to make sure the company "has plenty of liquidity" to operate and potentially refinance some secured debt, one of the people said. That new financing could total around $3 billion or $4 billion, other people familiar with the matter have said.

Another person familiar with the matter said CIT likely wouldn't roll out the debt-exchange offer and prepackaged bankruptcy solicitation until late Thursday night.

CIT is still considering selling assets, but any sales would likely be explored after the company's restructuring, a person familiar with the situation said.

A bankruptcy filing presents considerable risk for CIT, as financial companies have struggled to stay afloat in Chapter 11 amid anxiety from customers. But CIT hopes to solicit enough approval for a bankruptcy plan that would get it in and out of court quickly, people familiar with the matter said. A separate person familiar with CIT's plans said the company would aim to get in and out of bankruptcy in one to two months. This person said a prepackaged bankruptcy filing would be "surgical" and "the antithesis of Lehman Brothers."

CIT's balance sheet is weighed down by some $54 billion in total debt. The company's fortunes turned sour amid the recent credit crunch and a "junk" credit rating, which cut off the company's ability to raise money through bonds and short-term debt called commercial paper. Meanwhile, CIT had made bad bets on real-estate and commercial loans, leaving it without needed cash to meet looming debt obligations.

CIT's practice of raising money from debt markets to lend to customers became increasingly untenable amid high costs for such funds and an inability to charge similar rates on its loans. CIT's profit margins faltered and the company tapped $2.3 billion in capital from the government's Troubled Asset Relief Program.

The company's crisis reached a fever pitch over the summer, when the government determined the company's failure wouldn't significantly roil the fragile economy. The Federal Deposit Insurance Corp. denied CIT access to a loan guarantee program that would have allowed the company to charge lower interest rates on its bonds.

CIT scrambled to revamp its balance sheet with debt payments coming due. A group of bondholders gave CIT $3 billion in rescued financing on the condition it present a restructuring plan by Oct. 1.

- By Mike Spector, The Wall Street Journal; 212-416-2572; mike.spector@wsj.com

- By Kate Haywood, Dow Jones Newswires; 212-416-2218; kate.haywood@dowjones.com

- By Aparajita Saha-Bubna, Dow Jones Newswires, 617-654-6729; Aparajita.Saha-Bubna@dowjones.com