M&A

19 November, 2009

UPDATE 1-First Marblehead says unit sells all private loans

* Says banking unit sold remaining pvt education loans * Says proceeds of $3.7 mln

* Stock down 4 pct

Nov 19 (Reuters) - First Marblehead Corp (FMD.N), one of the largest securitizers of student loans, said its banking unit sold the remaining private education loans for about $3.7 million in proceeds to a newly formed trust affiliated with the parent company.

Following the latest sale of the loans, which had a carrying value of about $6.6 million at Sept. 30, the banking unit no longer carries any private education loans on its balance sheet, the company said.

The company also said it has begun examining strategic alternatives for Union Federal, including a potential sale for the banking unit.

In late 2006, First Marblehead won federal approval to enter the banking business by acquiring Rhode Island's Union Federal Savings Bank, which had $40 million of assets and one branch.

In July, it was ordered by the U.S. Office of Thrift Supervision to lower risk by reducing its concentration of private student loans, a move it said could cause a "significant" loss.

The Boston-based company had also agreed to special OTS oversight, and Union Federal had agreed to a cease-and-desist order from the regulator.

At that time, Union Federal had more of the loans on its books than had been expected when the OTS approved First Marblehead's purchase of the bank in late 2006.

First Marblehead has struggled since the credit crisis began. It was hit hard when The Education Resources Institute Inc, which guaranteed some of its loans, filed for bankruptcy protection in March 2008, and major client Bank of America Corp said the following month it would stop making private student loans.

Shares of the company were down about 4 percent at $2.16 Thursday on the New York Stock Exchange. They traded at a low of 60 cents a year back. (Reporting by Anurag Kotoky in Bangalore; Editing by Sweta Singh)

Source: http://www.reuters.com