CIT Boss Says, See Ya!
Pity those poor CIT Group (Stock Quote: CIT) shortsellers. Pretty soon they won't have CEO Jeff Peek around to make them rich anymore.
The small business lender, struggling to avoid bankruptcy, said Tuesday that Peek would resign at the end of the year. Peek joined CIT in 2003 and took over as CEO in July 2004 when the stock was trading above $35 a share. Shares of the company fell as much as 19% on Tuesday's announcement, closing the day at 92 cents per share.
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Amazing, even on the way out Peek is making CIT bears money. Boy, are those guys going to miss him.
And you know what? They are not alone. We here at the Five Dumbest Lab are going to miss you too, Jeff.
After posting billions in losses because of bad loans, CIT is currently in the middle of its second debt restructuring in recent months as it looks to reduce costs to remain in business. Last year, CIT was bailed out with $2.3 billion in federal money during the height of the financial crisis, and this summer it was granted a stay of execution again when it received a $3 billion emergency loan from some of its largest bondholders.
The news of Peek's departure comes with CIT bondholders still pondering a broad restructuring plan disclosed on Oct. 1 that would clear about $5.7 billion from the company's balance sheet and allow it to avoid filing for bankruptcy protection. The holders of roughly $10 billion in CIT debt have already indicated they plan to support the swap, which will give current debt holders new equity and essentially wipe out current holders of the common stock. CIT has also put in place a prepackaged bankruptcy reorganization plan for bondholders to consider.
The debt exchange offer expires on Oct. 29. So, move fast all you CIT bears. If Jeff Peek is leaving the building, then you don't want to leave money on the table.
Dumb-o-meter score: 95 -- A quick peek at the CIT chart under Peek's tenure may blind anyone long the stock.
