CIT Taps Credit Lines and Talks of Asset Sales

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Even as financial shares led a stock market rally Thursday, the crisis in the credit markets threatened to engulf one of the nation’s largest commercial finance companies.

The CIT Group, a century-old company that lends money to small businesses and midsize corporations, was forced to draw on $7.3 billion of emergency bank credit lines. Its shares and bonds plummeted.

CIT, whose businesses range from making student loans to financing purchases of airplanes and railroad cars, announced that it would try to sell some assets or businesses to raise cash and repay its debts. Analysts said the tightening credit squeeze could drive the entire company into the arms of a suitor.

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CIT prospered when credit was easy. But its fortunes began to plunge last summer as the credit crisis that began in the market for subprime home mortgages started to spread. The company posted a loss of $132.2 million last quarter, in part because of bad investments linked to subprime home loans. Meanwhile, the credit market crisis has made it difficult for CIT to issue bonds and commercial paper, or short-term I.O.U.’s.

"CIT prospered when credit was easy" generated mainly from subprime home mortgages says it all.