NEW YORK/BOSTON (Reuters) - Tyco International Ltd.'s , battling a

widening accounting and ethics probe, said on Friday it may delay the public offering for its finance arm, CIT Group, which is crucial to paying off debt.

Two major agencies cut their ratings on Tyco's debt to one notch above

junk, and its shares plunged 31 percent to their lowest level in nearly

six years.

Investors in the company, which makes everything from medical supplies to

sprinkler systems, have lost nearly $100 billion since the beginning of

the year -- more than in the collapse of energy giant Enron Corp. .

Tyco, reeling from the indictment and resignation of Chief Executive

Dennis Kozlowski, carries $23 billion in debt and is scrambling to sell

CIT to pay $3.25 billion due early next year.

In a statement, Tyco said it was committed to completing the CIT public

offering "as expeditiously as possible," stepping back from previous

predictions that the float would take place this month.

Meanwhile, the Wall Street Journal said New York prosecutors, who indicted

former chief executive Dennis Kozlowski for tax evasion earlier in the

week, are also investigating whether the company bought homes and art for

other officials without telling shareholders.

And regulators in New Hampshire, where Bermuda-based Tyco operates from,

said that they were in discussions with the U.S. Securities and Exchange

Commission about the company, although the state

regulators were not pursuing their own probe.

"Things can definitely worsen from here, and I think they will worsen

because they have real balance-sheet issues and they have zero

credibility," said Rob Plaza, an analyst at fund research firm

Morningstar.

During a somber conference call with analysts and investors, interim Chief

Executive John Fort said the market turbulence was just "noise" and said

third-quarter earnings expectations were unchanged. Fort, once again in

the post he held before Kozlowski, said there was no immediate liquidity

problem and progress had been made with SEC investigators.

But that did little to soothe investors. Its stock fell $4.50 to close at

$10.10 on the New York Stock Exchange.

The downgrades by Moody's Investors Service and Standard & Poor's, which

are likely to make borrowing more expensive, could reduce its cash flow by

$635 million in its fiscal third and fourth quarters, Chief Financial

Officer Mark Swartz said.

S&P, which also downgraded CIT Group, said Tyco had about $4 billion of

cash on March 31 -- enough to refinance debt that would come due

immediately if Moody's or S&P cut Tyco to junk.

Tyco has failed to find a buyer for CIT even at "fire sale" prices. Tyco

bought CIT last year for nearly $10 billion and is now expected to recoup

only about half that amount. Last month it failed to clinch a deal to sell

CIT to investment bank Lehman Brothers for $5 billion.

"There's no crisis with respect to cash in this company until we get into

the early part of 2003, but if they can't get cash out of that

transaction, they need to articulate another asset sale to be able to meet

their debt obligations next year," said Steve Altman, fixed-income analyst

for Commerzbank Securities in New York.

The company is reeling from the indictment of Kozlowski by Manhattan

District Attorney Robert Morgenthau, who charged him with conspiring to

avoid $1 million in sales taxes on expensive paintings.

"If the CEO would take those kind of risks in his personal life, then you

could make the assumption that he was acting that way at the company,"

Plaza said.

"Kozlowski was so hands-on and so aggressive throughout all parts of the

company that it had to touch other management. You could assume that type

of behavior was either allowed or encouraged."

Responding to the storm of controversy surrounding Kozlowski, Tyco said it

had launched "a comprehensive internal investigation" into his use of

company funds.

"I just want to really emphasize that Dennis is gone," Fort said.