Goldman Sachs could earn $1bn from potential CIT Group bankruptcy

Goldman Sachs will earn a $1 billion payout if commercial lender CIT Group goes into bankruptcy, according to media reports.

The payment would be due under the terms of the $3 billion rescue deal it agreed with CIT in 2008.

CIT saw the value of its stock plummet to less than $2 per share on last week's New York Stock Exchange.

Last year, it was cut off from its traditional source of funding, the commercial paper market, forcing it into the credit facility deal with Goldman Sachs.

The US government also bought more than $2 billion of CIT shares as part of the Troubled Asset Relief Program in December 2008.

But in July the company failed to secure a second US bailout after asking for a further $3 billion in rescue financing.

CIT chief executive officer Jeffrey Peek has asked bondholders to swap unsecured obligations for new secured debt and preferred shares, in an attempt to stave off bankruptcy.