By Josh Fineman
Oct. 13 (Bloomberg) -- CIT Group Inc., the 101-year-old lender that may file for bankruptcy protection, said Jeffrey Peek plans to resign as chairman and chief executive officer by the end of the year.
The board formed a search committee to find a new CEO, New York-based CIT said in a statement today.
Peek, 62, joins a list of bank executives who have announced plans to step down in recent weeks. Bank of America Corp. CEO Kenneth Lewis said last month he would be leaving by the end of the year, and Morgan Stanley head John Mack announced he would retire and hand over the job to Co-President James Gorman.
“He will continue to have our complete support as we conduct the search for his successor,” board director John Ryan said in the statement.
Peek joined CIT in 2003 after being denied the top job at Merrill Lynch & Co. The New York-based commercial lender lost $5 billion in the last nine quarters as the collapse of the market for subprime mortgages sparked the worst financial crisis since the Great Depression and cut off CIT’s short-term funding.
CIT has asked bondholders to exchange unsecured obligations for new secured debt maturing in four to eight years and preferred shares. Bond and credit-default-swap prices show that investors are speculating the offer to exchange about $29 billion of debt won’t prevent the company from filing for bankruptcy.
CIT, which finances about 1 million businesses from Dunkin’ Brands Inc. to Eddie Bauer Holdings Inc., will seek court protection through a pre-packaged bankruptcy should the debt exchange fail, according to an Oct. 1 filing. The company posted a second-quarter loss of $1.62 billion as more customers defaulted on loans.
Is CIT to medium to fail?
We asked this question in an earlier post:
A July excerpt from Bloomberg:
Treasury Bets U.S. Financial System Can Weather CIT Collapse (from Bloomberg)
By Scott Lanman and Vivien Lou Chen July 16 (Bloomberg) -- The U.S. spurning of CIT Group Inc.’s aid request suggests officials are betting they’ve fixed the financial system enough to withstand the bankruptcy of a mid-sized lender. “I hate to say this, but it was probably expendable,” said Dennis Santiago, chief executive officer of Institutional Risk Analytics, a Torrance, California, research firm that studies systemic risk. “It may have just missed the boat” on federal rescues, Santiago said.
PW: What I wonder, is what effect this will have on the CDS market? Has it truly recovered enough to take a hit of this size? Certainly small businesses are in no shape to have credit restricted again should a bankruptcy occur. The bankruptcy of this business lender could have the consequences of peripheral damage causing numerous small businesses to close their doors and further compound the Commercial Real Estate vacancy problem.
These type of outcomes can be expected if we are indeed entering a deflationary spiral.