Embattled CIT CEO Peek to retire at year end

NEW YORK (Reuters) - CIT Group Inc (CIT.N) Chief Executive Jeffrey Peek plans to retire at the end of the year, after failing to turn the sleepy commercial lender into an aggressive Wall Street player and then scrambling to pull it back from the brink of bankruptcy.

The company said its board of directors is forming a committee to search for a successor.

Peek, 62, has led CIT since 2003, and in September his contract was extended for another year. He has been widely criticized for being slow to recognize the extent to which the credit crunch would endanger the company's business model by lifting its borrowing costs.

The company is hoping to exchange much of its current debt for new debt and equity, in an effort to reduce its overall borrowings and strengthen its balance sheet. But the exchange is not going well, sources have told Reuters, and CIT is increasingly likely to file for bankruptcy protection.

CIT said in a quarterly filing with regulators that it plans to restructure outside of bankruptcy court, but that it may need to seek bankruptcy relief if its restructuring is unsuccessful.

CIT listed about $71 billion of assets on its balance sheet as of the end of June.

Peek was a long-time executive at Merrill Lynch before losing out on the CEO spot to Stanley O'Neal. After a brief stint at Credit Suisse, he landed at CIT, a comparatively obscure company whose bread and butter was businesses like factoring and equipment leasing. CIT focuses on small and mid-sized companies.

The century-old company was a unit of Tyco (TYC.N) until it regained independence in 2002 through an IPO.

Peek began transforming CIT into a smaller version of Merrill Lynch. He expanded investment banking and merger advisory, and pushed into student and subprime mortgage finance. He moved CIT's headquarters from an office park in suburban New Jersey to a stylish new glass-enclosed tower in midtown Manhattan. CIT became an active and public supporter of New York arts and culture.

But in 2007, the credit crunch began shutting down the bond markets that were CIT's lifeblood. As CIT's borrowing costs surged, its profits turned into losses. The slowing economy hurt the performance of its subprime mortgage loans, small business loans, and other assets. Around the same time, CIT's student lending business came under fire from New York Attorney General Andrew Cuomo.

In December 2008, the company secured $2.3 billion of financing from the government's Troubled Asset Relief Program, but by the middle of 2009, CIT needed more help. Peek pressed for U.S. support for the company's debt, but the government refused. The company instead got a $3 billion credit facility from bondholders and exchanged some debt.

CIT is hoping to restructure its debt and fund itself with deposits in the future.

(Additional reporting by Joseph A. Giannone; Editing by Gerald E. McCormick, Gary Hill)