Oct. 19 (Bloomberg) -- Billionaire investor Carl Icahn offered CIT Group Inc. a $6 billion loan as an alternative to what he called an “incompetent and unconscionable” proposal by the board of directors to avert collapse.

Icahn, who said he is CIT’s largest creditor, offered to underwrite a loan to the New York-based company that he said would save as much as $150 million in fees compared with the bank’s proposed financing.

CIT last week changed the terms of a proposed debt exchange to swap $29 billion of securities. The plan seeks to reduce debt by at least $5.7 billion after CIT was locked out of the unsecured debt markets it relies on for funding. At the same time CIT pursues the out-of-court debt swap, it’s also asking bondholders to vote on a prepackaged bankruptcy plan.

“This loan is a bad-faith attempt to buy votes for the company’s Exchange Offer/Plan of Reorganization, since all prospective lenders must vote their CIT debt in favor of the company’s plan in order to receive an allocation of the new loan,” Icahn, 73, said in a letter to the board today.

The secured loan being offered by CIT is “the latest example of incompetent and unconscionable behavior” by the company’s board of directors, Icahn said in the letter.

CIT spokesman Curt Ritter didn’t immediately respond to a message seeking comment.

Under the bank’s proposal to revise the terms of its offer, maturities on new notes issued in exchange for existing bonds will be shortened by six months, CIT said Oct. 16. The company will also boost the amount of equity offered to subordinated debt holders and include notes due after 2018 that previously weren’t part of the exchange offer or reorganization plan that was announced Oct. 1.

Icahn said his loan would charge a total of 2.5 percent in fees, “exactly 50 percent of the currently proposed fees,” and wouldn’t require a vote for the exchange offer and restructuring plan to participate.

To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.net

Last Updated: October 19, 2009 09:59 EDT