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Commercial lender CIT Group filed for Chapter 11 Sunday in the U.S. Bankruptcy Court in Manhattan, listing $71 billion in assets and $64.9 billion in debt.

The filing ranks as one of the largest by a financial institution. A $1 billion loan from Carl Icahn will fund operations while CIT reorganizes as part of a prepackaged bankruptcy.

The agreement represents a bit of a turnaround from just days ago, when CIT rejected Icahn's offer to loan the company $4.5 billion and instead accepted a similar offer from a group of senior lenders headed by Bank of America and Merrill Lynch.

CIT was hoping to avoid a bankruptcy filing through a debt exchange offer. The lender asked bondholders to exchange their debt for equity in the company or new debt that would mature later. CIT hoped to reduce its outstanding bondholder debt—now at around $31 billion—by about $6 billion.

However, the deadline on that exchange passed on October 30 and the last-minute bid failed, forcing CIT to pursue its back-up plan—a prepackaged bankruptcy.

Also See: CIT to Test Speed of Bankruptcy Court (from The New York Times)

Also See: CIT Files Bankruptcy; U.S. Unlikely to Recoup Money (from Bloomberg)

The company's senior bondholders, who hold about $10 billion of the outstanding debt, had already approved the terms of the prepackaged bankruptcy. Under the prepackaged terms, bondholders would receive new debt worth 70 cents on the dollar and all the equity in a reorganized CIT, according to The Wall Street Journal.

Icahn holds about $2 billion of CIT's debt and had opposed the prepackaged bankruptcy, believing that a liquidation process would net more for creditors. The $1 billion Icahn agreed to loan CIT is intended to back up the $4.5 billion loan CIT secured Wednesday and could also be used as debtor financing, according to the WSJ and Bloomberg.

CIT also agreed with Goldman Sachs on a separate deal that restructures the terms of a $3 billion emergency loan from Goldman, according to Reuters and lawyers working on the deal. In effect, CIT paid Goldman a $285 million fine to reduce the overall value of the original loan by about $875 million to $2.13 billion, according to Reuters. The prior terms had required CIT pay Goldman $1 billion in the event of a bankruptcy filing, Reuters reported. 

Cleary Gottlieb Steen & Hamilton advised Goldman in the loan restructuring, according to lawyers familiar with the matter. Sullivan & Cromwell is providing counsel to CIT's board.

CIT is repped in the bankruptcy by Skadden, Arps, Slate, Meagher & Flom. Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton & Garrison is representing the lender's senior bondholders and Sonnenschein, Nath & Rosenthal is representing Icahn on the matter, according to sources familiar with CIT's restructuring.

Rosenberg and the lead Skadden lawyers on the matter did not immediately return calls seeking comment. Peter Wolfson, a Sonnenschein partner who has advised Icahn and his affiliates in the past, also did not respond to messages seeking comment.

This article first appeared on The Am Law Daily blog on AmericanLawyer.com.