UPDATE 1-ITT says CEO quits board posts, to resign in February

Mon Aug 4, 2014 6:42pm EDT

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(Adds CEO resignation)

Aug 4 (Reuters) - For-profit college operator ITT Educational Services Inc said Chief Executive Kevin Modany has stepped down as chairman of its board and will resign from his post, effective Feb. 4.

ITT's shares were down marginally in trading after the bell.

They fell nearly 50 percent during regular trading on Monday to their lowest in 14 years after the company said a deal to sell some of its properties fell through.

ITT said the potential buyer, College Portfolio Buyer LLC (CPB), dropped out after ITT refused to extend a due diligence period.

CPB had sought an extension to the due diligence period to Sept. 15 from July 31 under its sale and leaseback pact, ITT said late on Friday. (bit.ly/1qUhC0A)

ITT was prevented from entering into financial agreements with others during the due diligence period as part of the deal with CPB.

"While another agreement could ultimately be established, we believe this termination should be viewed negatively in lieu of the company's already limited capital flexibility and recently increased oversight from the (Department of Education)," Compass Point LLC analyst Michael Tarkan said in a note to clients.

ITT said in May the sale of its 24 properties could fetch about $119.1 million when it announced the deal.

The company said late on Monday that it had established a new office of executive chairman and named board member John Dean to the position.

ITT said it may extend Modany's term as CEO by up to three months. Modany has also stepped down as a director on the board.

The company said on Friday it had amended its credit agreement with lenders to get waivers on certain debt covenants and defaults.

ITT offers technology-oriented undergraduate and graduate degree programs through its ITT Technical Institutes and Daniel Webster College.

For-profit colleges have come under fire in recent years for their poor track record in helping students find employment.

The U.S. Consumer Financial Protection Bureau sued ITT in February, accusing it of exploiting students and pushing them into high-cost private loans that left them with huge debts.

ITT shares closed down 46 percent at $7.72 on the New York Stock Exchange. Up to Friday's close, the stock had fallen 44 percent since the deal was announced. The stock traded as high as $133 in 2009. (Reporting by Sweta Singh and Mridhula Raghavan and Rohit T.K. in Bangalore; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila)

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Comments (1)
CamdenKid wrote:
EDMC (Art Institutes) may be next. Career Education (Cordon Bleu) and Lincoln Tech may also be in trouble in this for-profit colleges meltdown.

Aug 04, 2014 7:56pm EDT  --  Report as abuse
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