(Reuters) - CIT Group Inc (CIT.N), the cash-strapped corporate lender struggling to avoid bankruptcy, made an out-of-court settlement with apparel maker Scherr Inc that sued to end its relationship with the company, the New York Post said.

Photo: REUTERS/Brendan McDermid

CIT steered clear of the risk of a ruling that might have caused a mass exodus of clients at its "factoring" division, which finances inventory for more than 60 percent of the apparel industry, the paper quoted legal experts as saying.

Under the settlement, CIT gave in to its client's demands to be freed from its contract, the paper said, citing sources.

Since Scherr sued CIT, numerous apparel companies have been mulling similar court actions, the paper quoted industry insiders as saying.

Scherr, based in Livingston, New Jersey, has said in court documents that CIT has not been able to give it the assurances it needs that it will hold up its end of the "factoring agreement" it signed earlier this year. Scherr had asked the court to terminate that agreement.

CIT and Scherr's lawyers could not immediately be reached for comment by Reuters.

(Reporting by S. John Tilak in Bangalore; editing by Simon Jessop)