March 21 (Bloomberg) -- CIT Group Inc., trying to quell concerns about a cash shortage at the biggest independent U.S. commercial lender, may raise as much as $7 billion from asset sales and said it has enough money to last through 2008.

CIT, which quit subprime mortgage lending last year, plans to sell some businesses in the first quarter while keeping its ``marquee'' units intact ``as much as possible,'' Chief Executive Officer Jeffrey Peek said in a conference call yesterday. The New York-based company drew on its entire $7.3 billion of emergency credit lines after being cut off from customary sources of cash.

``Our first priority here is to try and fund our most valuable relationships and keep those functioning, keep those alive, keep those breathing,'' Peek said. ``We haven't had any trouble doing that so far.''

CIT's shrinking access to cash adds to evidence that the credit crunch -- which already has claimed Bear Stearns Cos. and Countrywide Financial Corp. -- isn't responding to the Federal Reserve's effort to encourage more lending. The ``protracted disruption'' in capital markets may force Peek's company to find a ``strategic'' partner that can provide funding, he said.

The lender had its biggest drop in almost six years of New York Stock Exchange trading yesterday before a mid-session halt to announce that the company had tapped its credit lines. CIT closed down $2.01, or 17 percent, at $9.63. The shares fetched more than $61 last June.

Bonds Fall

The company's $500 million of 5.6 percent notes due in 2011 slumped to as low as 66.5 cents on the dollar, according to Trace, the Financial Industry Regulatory Authority's bond- pricing service. CIT has $2.8 billion of commercial paper due this year and $8.2 billion of other debt.

CIT may also have more than $4 billion of holdings tied to subprime mortgages, according to a March 17 report by Standard & Poor's. Subprime mortgages are made to people with weak credit, and record defaults on the loans helped trigger the global credit rout.

``It's tough to put a specific date on it, but they should be okay for the next couple of quarters,'' said David Chiaverini, an analyst at Bank of Montreal's BMO Capital Markets division in New York who has a ``market perform'' rating on the stock. ``I don't expect a bankruptcy.''

CIT posted a $123.2 million fourth-quarter loss before preferred dividends because of bad mortgages and the declining value of its student-loan business. Peek stopped originating subprime home loans last year to focus on lending and advisory services to mid-sized companies. In January, CIT said it will cut its workforce this year by 5 percent.

Different Model

``It's not like a Bear Stearns, where overnight you're out of cash,'' said Richard Hofmann, an analyst at CreditSights Inc. in New York. ``It's a different business model where the maturities are spaced out over time and you still have income coming in.''

Bear Stearns was forced to sell itself to JPMorgan Chase & Co. when a cash drain threatened to push the New York investment bank into insolvency.

Peek, who was in the running to be president of Merrill Lynch & Co. before losing a power struggle in 2001, joined CIT in 2003 as chief operating officer. He took over as CEO in 2004.

CIT was founded in 1908 as the Commercial Credit and Investment Co., and was first to offer financing to help people buy Studebaker cars. The company spent a year as a unit of Tyco International Ltd., which paid $9.5 billion for CIT in 2001.

Lenders including Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Barclays Plc gave CIT four separate credit lines, according to regulatory filings. The lines are typically given as back-up credit in case a company can't finance itself in other markets such as commercial paper.

Once a company draws on the lines, banks must set aside capital to cushion themselves against potential losses.

``Banks aren't thrilled to be lending to anyone right now, as this ties up capital,'' said Mark Howard, the head of credit analysis at Barclays Capital Inc. in New York.

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.

Last Updated: March 21, 2008 00:01 EDT