After a day of trading in which investors watched their shares lose 46 percent of their value, Carmel-based ITT Educational Services Inc. announced late Monday afternoon that CEO Kevin Modany planned to resign within six months.
Modany, 47, also resigned immediately as director and chairman of the struggling for-profit education firm, which recently has drawn scrutiny from government authorities.
Shares were trading at $7.72 at market close on Monday, down $6.59 from their close on Friday. The stock has lost 77 percent of its value since the beginning of the year.
ITT disclosed late Friday that a deal to sell and lease back company real estate had fallen through. The deal potentially was worth $119 million for the firm.
The failure of the real estate deal was the latest in a string of mishaps this year for ITT. In May, the company reported that new student enrollment was falling by 10 percent or more due to a change in advertising that had backfired. And the company has not finalized its financial reports since the third quarter of 2013 because it may have improperly excluded a private student loan program from its balance sheet.
Modany, who will step down as CEO on or before Feb. 4, has been ITT’s chief executive since April 2007 and chairman of the board since February 2008. He has presided over the company's biggest highs and some of its deepest lows.
During the depths of the recession in 2009, ITT's enrollment skyrocketed as displaced workers rushed into its classrooms to acquire new skills. The company's stock price spent most of 2009 and 2010 above $100 per share.
But during that same period, when banks didn't want to lend to help students pay ITT's high tuition, ITT made fateful decisions that have come back to bite it.
ITT promised to cover losses on a series of loans extended by credit unions. But when unemployment remained high, ITT students defaulted on those loans at record rates–with more than 60 percent failing to repay. ITT estimates it will lose $127 million on those loans.
Those loan programs also drew the scrutiny of the Consumer Financial Protection Bureau which sued ITT in February for what it called "predatory" lending, in which ITT employees allegedly pushed students into high-cost loans likely to end in default. Also, the SEC is looking into ITT's accounting practices. And now the company has said that the U.S. Department of Education may require it to post a letter of credit to continue qualifying for federal student grants and loans.
The company also said on Aug. 1 that it was arranging financing for a letter of credit of as much as $98 million, an increase from $80 million, in case the Education Department demands it.
On Monday, ITT announced that longtime board member John Dean would become executive chairman.
"We thank Kevin for his many contributions to [ITT] since he became CEO in 2007, especially the commitment, dedication and enthusiasm that he brings to the company every single day," Dean said in a prepared statement. "Kevin is a widely respected leader in the industry, and has worked tirelessly for over a decade on behalf of our students and the employers who hire them.
"Over the past several years, he has led the company through a very challenging time in our industry with an unwavering passion and conviction that has served our institutions and their students well."