First Marblehead (FMD)

HenryTo · Posted: Fri Feb 17, 2006 1:04 am Post subject: First Marblehead (FMD)

Interesting take on FMD from Bankstocks.com. I haven't kept track of it since it tanked in October:

http://www.bankstocks.com/article.asp?type=1&id=9880853

rffrydr · Posted: Sat Apr 07, 2007 1:35 pm Post subject:

Full Barron's story mentioned in our Subprime post. Interesting stock in it's own right, tieing parents to overspending children in a period of racing educational inflation--as well and 70% intermediary margins and unfolding scandalous connections to Financial Aid Depts.

More interesting is the link to subprime woes on setbacks on current tranche payments. When dad can't do it there must be a mortgage in the background. Stock has held up well even after this article though:

http://www.smartmoney.com/barrons/index.cfm?story=20070403
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HenryTo · Posted: Sat Apr 07, 2007 8:37 pm Post subject:

Here is Tom Brown's take on it. I haven't checked out the latest 10-K or 10-Q so I can't comment but it looks like Barron's may have flunked out this time. A must-read:

http://www.bankstocks.com/article.asp?type=1&id=9881345

rffrydr · Posted: Sat Apr 07, 2007 9:52 pm Post subject:

Yeah, Brown has some solid points (I thought I'd posted his rejoinder). Foremost among them is the "lifer" aspect of a student loan default. It comes with the full force and judgement of the Feds--and will follow you til death. BK does nothing for you. If that doesn't pull Mom and Dad over to your side I don't know what will.

The tone is a bit vitriolic though. Methinks he doth protest too much. The issues are only now coming to bear (check out the front pages last week on USC)--particularly with the defaults. The "special nature" of these loans Brown talks about, the "jobless graduation, can work as much against his side. We won't know about the delayed payments until some time, whether it's employment or the doubling of payback rates. I feel confident that the numbers guys like Browne won't be on top of it should defaults come to pass.

Barrons is right in stating this stock is a focal point for the subprime "spillover" effect, dividing bulls and bears sharply. Browne's tone proves that part in spades.

I was very much interested in this puppy at the start; bought 15K of RMH last week so I want to be bullish on this stuff--but I'm giving Barrons the nod.
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rffrydr · Posted: Tue Apr 10, 2007 8:05 pm Post subject:

Down 3% today; after defying the Barron's article. Housing may be showing some resilence but subprime keeps on giving--and crawling up the credit chain. Or maybe it's just the resets.
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rffrydr · Posted: Sun Apr 15, 2007 8:03 am Post subject:

Marblehead now well up to its neck in scandal:

http://www.nytimes.com/2007/04/15/education/15direct.html?hp

Is this a buying opportunity or will they go the way of subprime--die and be reinvented?
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rffrydr · Posted: Mon Apr 16, 2007 9:11 am Post subject:

At the same time SallieMae gets taken private!

http://www.smartmoney.com/bn/ON/index.cfm?story=ON-20070416-000227-0757

25 Billion. Democrats will be thinking about this next weekend.

HenryTo · Posted: Mon Apr 16, 2007 9:39 am Post subject:

FMD tanks 25% in light of the buyout news - as investors speculate that FMD will lose its two biggest clients (JPM and BAC) since they were a part of this buyout deal as well. Together, JPM and BAC make up more than 40% of FMD's total revenue.

nodoodahs · Moderator Joined: 06 May 2005 Posts: 1736 Location: TX

Time to buy may have past ... at 10 am EDT? If it draws a bullish candle today there may still be "bounce" left in it? Not for me, but maybe an opportunity ...
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rffrydr · Posted: Mon Apr 16, 2007 10:15 am Post subject:

Everybody wants to buy today.

FTSE beat it's old highs last night and DAX on the oil stocks/currency looks likes it's launching--only one problem, the XLE.

Euro now rules global bond issuence.
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rffrydr · Posted: Mon Apr 16, 2007 9:29 pm Post subject:

rffrydr · Posted: Tue Apr 24, 2007 9:13 am Post subject:

Shakeout in "subprime" education, DeVry noted prominently:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1dp22_bhJJc&refer=home
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rffrydr · Posted: Wed Nov 28, 2007 11:36 pm Post subject:

Mr. Brown comes out from shadows:

http://seekingalpha.com/article/55549-fbr-s-latest-first-marblehead-downgrade-makes-no-sense
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HenryTo · Posted: Wed Dec 05, 2007 9:22 pm Post subject:

Another downgrade for FMD, as analysts question its entire business model in the midst of the current credit crunch:
----------------------------------------------------------------------------------
First Marblehead Fall on Downgrade
Wednesday December 5, 6:36 pm ET
First Marblehead Shares Sink on Downgrade, Rising Concerns Over Ability to Securitize Loans

NEW YORK (AP) -- Shares of First Marblehead Corp. sank Wednesday after an analyst downgraded the stock on rising concern over the student lender's ability to securitize loans in December and beyond.
Shares plunged $5.05, or 20.2 percent, to $19.93 in Wednesday trading, a 52-week low. Shares have traded between $24.98 and $57.56 in the past 12 months.

Sandler O'Neill & Partners analyst Michael Taiano downgraded the stock to "Hold" from "Buy," saying that recent credit concerns raised by the rating agencies reduce the potential upside for the shares.

On Tuesday, Moody's said it is reviewing 16 tranches of First Marblehead deals for possible downgrade. Analysts believe the company may forego the securitization of loans in the second quarter.

First Marblehead helps banks like Bank of America Corp. and JPMorgan Chase & Co. package students loans into pools and sell them as bonds. The company charges fees for advising on the deals and helping funnel the payments to the bondholders. Virtually all the company's revenue is generated from these period securitizations.

"We are concerned whether First Marblehead's current structure can be sustained through a prolonged liquidity crunch and that its alternatives are limited and less economically attractive," Taiano said.

Taiano cut his fiscal 2008 earnings-per-share estimate to $3.56 from $4.40 and his 2009 estimate to $3.90 from $5. Analysts polled by Thomson Financial, on average, anticipate 2008 earnings of $4.37 per share and 2009 earnings of $4.95 per share.

Analysts at Bear Stearns & Co. and JPMorgan Securities also reduced their earnings estimates.

Bear, Stearns analyst David Hochstim cut his fiscal 2008 estimate to $3.23 per share from $4.56 per share.

"This ratings action places even more pressure on First Marblehead in an already difficult securitization market as potential buyers for the company's subordinate notes would require more compensation for risk than they would have in previous periods," Hochstim said. "Without access to securitizations, earnings in future periods will likely deteriorate even further than we currently estimate."

Hochstim said he expects the company to securitize loans in the March quarter and recoup some of the volume lost in December.

George A. Sacco Jr. of JPMorgan Securities reduced his full-year earnings estimate to $3.57 per share from $4.55 per share.

Sacco said he is encouraged by the company's proactive steps to improve credit performance, such as contacting delinquent borrowers after 60 days instead of 90 days and implementing tighter underwriting standards.

"First Marblehead can manage through a quarter or two of volatility and limited liquidity primarily by using its option to have lenders hold loans until conditions improve," Sacco said. "However, the longer-term viability of First Marblehead's business model would likely start to be questioned if the company cannot access the securitization market for three to four quarters or longer."

Sacco anticipates the asset-backed securitization market to remain challenging through at least the first calendar quarter of 2008.

rffrydr · Posted: Thu Dec 06, 2007 8:57 am Post subject:

Tom Brown's fund is down 50%.

http://www.forbes.com/reuters/feeds/reuters/2007/11/30/2007-11-30T212220Z_01_N30286575_RTRIDST_0_HEDGEFUNDS-NOVEMBER.html
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