Dec. 8 (Bloomberg) -- CIT Group Inc., the 101-year-old commercial lender, won court approval of a plan to cancel old shares, shed debt and exit bankruptcy court protection with new stock worth as much as $11 billion.

U.S. Bankruptcy Judge Allan Gropper in New York today confirmed CIT’s so-called prepackaged Chapter 11 reorganization plan, which already had creditor support when CIT filed for bankruptcy last month. The U.S. won’t recover much, if any of the $2.3 billion in taxpayer money used in a bailout of CIT, and shareholders will be wiped out.

“It’s an enormous achievement to have gotten the vote that you’ve gotten,” Gropper told lawyers for CIT. He said the plan could take effect on Dec. 10.

After 5 1/2 weeks in bankruptcy, CIT’s confirmation hearing moved quickly because of strong creditor support. Gropper directed New York-based CIT’s witnesses to give testimony on “narrow” issues raised by objectors, most of whom were individual bond or stockholders representing themselves in court via telephone.

“The individuals on the phone may be losing their life savings, or funds that are extremely important to them,” the judge said. “That is probably true of many people throughout the country.” Gropper said that the Bankruptcy Code allowed CIT to shed those debts, and that the company would serve an important economic function by reorganizing.

CIT’s plan reduces the company’s debt by eliminating $10.5 billion to $11 billion in unsecured debt. It extends maturity dates of the company’s bank and bond debt by three years.

$34.3 Billion Exchange Offer

CIT solicited support from its large debt holders in advance of the bankruptcy, with an exchange offer that covered $34.3 billion in debt.

“CIT now has a stronger capital structure and improved liquidity profile,” said Chief Executive Officer Jeffrey Peek in a company statement today. CIT also said it will commit $500 million for small business lending on government-guaranteed loans and $1 billion for vendor financing.

Peek, who previously said he will step down at the end of the year, has yet to be replaced, and the company said today the search for a new CEO is ongoing.

70 Percent Recovery

Greg Galardi, a lawyer for the company, said today that senior unsecured debt holders get about 70 cents on the dollar plus equity in the new company. Holders of preferred stock might also get a contingent recovery depending on the value of the company’s new stock, he added.

CIT Group’s reorganization plan, in a modified second draft, had 15 objections, mostly informal, which relate to holders of common stock who wanted shares of the new company, noteholders who wanted to be paid in full, and bondholders who wanted their debt reinstated.

CIT sought bankruptcy protection Nov. 1, citing losses on subprime mortgages and tightening credit markets, and listing assets of $71 billion and debt of $64.9 billion.

James Kilman, managing director at Morgan Stanley, an adviser to CIT Group, said in a statement supporting CIT’s confirmation that equity in the new company will be worth $5 billion to $11 billion, based on a Dec. 31 exit.

The case is In re CIT Group Inc., 09-16565, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

Last Updated: December 8, 2009 14:21 EST