Former Merrill Lynch CEO John Thain, who brokered the investment bank's controversial sale to Bank of America, is taking over as chairman and CEO of CIT Group as the commercial lender continues to restructure its business following a brief stay in bankruptcy protection last year.
CIT Group Inc., one of America's largest lenders to small and mid-sized businesses, said Thain will take the helm immediately. The 54-year-old replaces acting interim CEO Peter J. Tobin, who will remain on CIT's board. Tobin had stepped in while CIT searched for a permanent replacement for Jeffrey Peek, who retired as chairman and CEO on Jan. 15.
CIT said its new chief executive will get an annual base salary of $6 million. That's generous by Wall Street standards, but his bonus of up to another $1.5 million is relatively low.
Thain's salary includes $500,000 in cash, $2.5 million of restricted CIT stock with a holding period of one year and $3 million in stock restricted for three years, the company said in a regulatory filing.
As chairman and CEO of Merrill Lynch, Thain's deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.
Thain resigned as head of global wealth management at the combined company shortly after the deal was completed and later repaid the bank for the renovations. He has defended the acquisition, saying Merrill was transparent with Bank of America about the company's losses and bonuses before the purchase closed. New York Attorney General Andrew Cuomo's office filed civil charges last week against Bank of America, its former CEO Ken Lewis and former Chief Financial Officer Joe Price, saying they misled investors about the Merrill Lynch deal.
Prior to Merrill, Thain served as CEO of the New York Stock Exchange and president and chief operating officer of Goldman Sachs. A CIT spokesman said Thain's role at the NYSE, where he modernized the exchange and better positioned it to compete in the global marketplace, was one of the accomplishments that most impressed CIT's board.
"John is a well respected financial services executive and proven leader who is uniquely qualified to lead CIT at this critical stage," said CIT lead director John Ryan in a statement. "We have the utmost confidence in John and are pleased to welcome him to CIT."
Jeff Aronson, co-founder and managing principal of CIT investor Centerbridge Partners, said his firm fully supports CIT's decision.
Indebted lender
Thain's appointment brings stability to the top ranks of a company which has seen a series of management departures since it emerged Dec. 10 from a quick stay in bankruptcy court.
President and Chief Operating Officer Alexander T. Mason, 58, is leaving the company Feb. 26. Chief Financial Officer Joseph Leone has said he plans to retire in April. CIT Group also last month announced the resignation of two directors and the appointment of three outsiders as it completed a shift to a more independent board to guide its restructuring effort.
CIT Group, which lends to more than 3,000 businesses including supermarkets and department stores, was forced into bankruptcy after failing to raise cash to pay off outstanding debt. The more than 100-year-old company also was hammered by mounting loan losses as more customers fell behind on repaying loans during the recession.
Common stock holders and the government lost their investments when CIT filed for bankruptcy protection. The Treasury Department had given CIT $2.3 billion in loans as part of its $700 billion financial bailout plan.
The company moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan. It was able to cut its total debt by $10.5 billion and deferred debt maturities for three years. The same month it emerged from bankruptcy it made plans to start lending again, committing to fund $500 million in new government-guaranteed loans to small business customers in 2010.
Thain inherits a company that in addition to its lending activities is the third-largest railcar leasing firm in the U.S. and the third-largest in airline financing globally, according to its Web site.
"Much has been accomplished in recent months to position CIT for renewed success," Thain said in a statement. "We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs."