A federal judge has approved CIT Group’s motion to hire Sullivan & Cromwell as special counsel for the duration of its bankruptcy case. Sullivan & Cromwell, which does not have a traditional bankruptcy practice, will join Skadden, Arps, Slate, Meagher & Flom (CIT’s lead counsel) and Curtis, Mallet-Prevost, Colt & Mosle (conflicts counsel) as one of the lead firms on the lending giant’s mega-bankruptcy.
As we reported earlier this month, S&C has been advising CIT Group’s board of directors since August, when the company was trying everything possible to restructure its massive debt load outside of bankruptcy court. But CIT Group’s initial bankruptcy petition said S&C would “act as special legal counsel to CIT going forward on certain corporate matters.” Why the change from board to company counsel? According to three sources familiar with the case, the switch was meant to keep S&C and firm chairman Rodge Cohen on the case by guaranteeing that the debtor’s estate would be allowed to pay the firm; bankruptcy judges often reject requests to pay board counsel out of the debtor’s coffers, those sources said.