CEO Watch Jeffrey Peek, CIT Update #2

Back in July, I placed Jeffrey Peek, CEO of troubled business lender CIT, on the CEO Watch list. Early today news came out that Peek, Chairman and CEO, would resign his position at the end of the year. Too often these days top executive changes take place very late in the game. Let’s see if CIT can find a way out of its troubles and bring in a leader that can help its circumstances. According to a story by Alan Rappeport for the Financial Times,

Peek’s resignation comes a little more than a month after CIT extended his contract by another year, signaling that he would lead the company through its restructuring. In his new contract, which was set to expire in September 2010, Mr Peek was prohibited from any compensation not permitted under the terms of the government’s troubled asset relief programme and lost the privilege of using the corporate aircraft.

Hopefully more companies will take a cue from CIT’s troubles and set in place succession plans and at a minimum, make management decisions more quickly when the circumstances require changes.

For more:

Bloomberg

NPR

WSJ Deal Journal

CEO Watch, Jeffrey Peek, CIT Update 1

In July as CIT continued to risk bankruptcy I placed Jeffrey Peek on Liberum’s CEO Watch list. Earlier today it was announced that CIT extended Peek’s contract for another year. In a Reuters story earlier today by Juan Lagorio,

CIT Group Inc said it has extended the contract of Chief Executive Jeffrey Peek for one year, even though his decisions to expand into risky businesses helped to push the lender to the brink of bankruptcy.

… “Keeping him (Peek) on board would minimize any distractions as the company tries to complete its restructuring,” said Sameer Gokhale, an analyst at KBW.

… “Getting a new CEO at this point in time wouldn’t really accomplish anything because the company is dealing with funding, liquidity and capital challenges, and that is not something a new CEO can fix easily,” Gokhale said.

The circumstances surrounding Peek’s contract extension are somewhat similar to many companies today. Boards remain reluctant, particularly during difficult times, to change the “captain of the ship” even while the ship is sinking or floundering. Stay tuned.

For more:

Bloomberg

CEO Watch- Jeffrey Peek, CIT

Jeffrey Peek, CIT’s CIT (NYSE) CEO since 2003 appears to have entered a status similar to many of the financial CEOs that were forced out during the financial crisis over the last year and a half, e.g., Stanley O’Neal of Merrill, Sir Fred Goodwin, Royal Bank of Scotland, Martin Sullivan, AIG … CIT has been in free fall of late and is looking to the government for help. It is unlikely Peek will remain as CEO after the company’s crisis manages to come under control. According to a story by Paul Tharp in the New York Post,

The White House is “in advanced talks” trying to extinguish a sudden financial wildfire that could swallow CIT Group, the financial firm that bankrolls the nation’s small businesses.

… The company, which reported more than $3 billion of losses in the past eight quarters, said it hired Skadden, Arps as an adviser. Skadden is known for its work in mergers and acquisitions and bankruptcies.

CIT warned yesterday in internal documents that it’s in danger of running out of cash unless it can get a second round of federal bailout help like that of Wall Street’s banks and other cash-strapped financial firms.

Peek can be expected after the crisis is handled to find himself a lightning rod for the company’s risky business decisions. Keep a close eye on how Peek handles the current crisis and how he is ultimately portrayed by institutional investors and the government. In a story by Ari Levy and Linda Shen of Bloomberg they examine the difficulties Peek and CIT are facing. The writers quote Sean Egan, president of Egan-Jones Ratings Co. in Haverford Pennsylvania,

“You could make a cogent argument that senior management didn’t have a good grasp of the financial storm that was on the horizon,” … “CIT has been through a number of near-death experiences. This time they cut it too close.”

The Bloomberg reporters go on to say,

… On Peek’s watch, the shares soared to a record $61.59 in February 2007 before plunging 98 percent as the company reported eight straight money-losing quarters. CIT’s debt rating was cut by Standard & Poor’s yesterday to seven levels below investment grade, as the ratings firm cited company requests to draw down on credit lines.

Moody’s also slashed its rating yesterday, to B3 from Ba2, or six levels below investment grade, because of “inadequate progress” toward improving liquidity. CIT, which lends to 950,000 businesses, warned that a collapse would put manufacturing and retail clients at risk.

It is only a matter of time for Peek.

For more:

Financial Times (update July 16)

New York Times (update July16)