Is Buffett Eyeing CIT?

Is a billionaire investor stalking CIT Group ( CIT)?

A source following the embattled New York-based commercial finance company, which on Thursday was forced to draw on its entire $7.3 billion emergency revolving credit line in order to pay down debt, says CIT has been on Warren Buffett's radar for a possible cash infusion or outright purchase.

Buffett's interest could not be confirmed and a spokeswoman at Berkshire Hathaway's ( BRK.A) offices in Omaha, Neb., said the Sage of Omaha was not immediately available for comment. A CIT spokesman declined to comment.

Peek said late Thursday in a public statement that "protracted disruption'" in capital markets was forcing the company to tap the capital markets. He added the company might shop assets to fund itself.

During an afternoon conference call, Peek said that asset sales and identifying "a strategic partner" would be a part of the firm's plan toward repaying its credit lines. "We've had preliminary discussions with several; we've gotten close with one," Peek said.

CIT noted that it has approximately $45 billion in unencumbered assets that it might be able to shop. The CEO also noted during the call that a number of institutions were being considered as partners, but did not specify names. He also did not highlight which assets specifically it might look to unload.

Sources tell TheStreet.com that the firm has essentially been in search of a buyer or partner for the past several months, during a credit crisis that has seen the costs of performing its core financing business deeply undercut by ballooning corporate borrowing costs. Flagging confidence also saw the stunning collapse of Bear Stearns ( BSC), which is being offered a $2-a-share buyout from JPMorgan Chase ( JPM) being back by the Federal Reserve.

The source says another potential good fit for CIT is vulture investor Wilbur Ross, who also may have been asked to look at the company. Ross has been pushing into distressed assets and opportunistic investments at a rapid clip. An assistant at his office in New York said the billionaire investor was in transit and could not be reached for comment.

"Our decision today is a result of the protracted disruption in the capital markets as well as recent actions by the rating agencies," Peek's public statement read.

Standard & Poor's cut CIT's short-term rating one level on Monday to A-2 from A-1 and the long-term rating to A- from A. Moody's Investors Service cut the firm's short-term rating one level to Prime-2 from Prime-1 and lowered the long-term ratings to A3, its fourth level of investment grade, from A2. CIT is on the hook this year for $2.8 billion of commercial paper coming due and $8.2 billion of other debt.

CIT's business centers on funding loans to entities for commercial leases, including airplanes and trains, as well as offering home lending, small-business lending, student loans, structured financing and commercial real estate lending.

Credit markets have been particularly skittish about lending due to a crisis in confidence about what market participants are holding on their balance sheets.

"We are actively positioning CIT to maximize value by optimizing our business portfolio and sizing our company to market conditions," Peek continued.

Buffett is said to have expressed an interest injecting capital or purchasing a stake in CIT that would have been at or around $22 a share -- a price at which the finance shop was trading around on March 8. CIT, which closed down 2.1% to $9.58 Thursday. It is off more than 60% since the beginning of the year and fell as low as 28% in Thursday trading on the news of its funding woes.

CIT has been criticized for having a rather shaky portfolio that consists of student loans and home mortgages that could be facing big writedowns. Already, the firm posted a $123.2 million loss last quarter due to souring mortgages and student loans. The majority of CIT's portfolio, however, is relatively strong but under pressure largely because of the unsettling market environment.

Peek, who joined CIT five years ago, has been trying to create a more diversified lending company that would make CIT a stronger entity. In January, CIT said it will cut its workforce this year by 5%, after already reducing staff by about 4.4% last year.