First Marblehead says loan volume falls

BOSTON—First Marblehead Corp., which packages student loans for sale to investors, said Thursday the volume of loans it had available for that activity dropped 66 percent in the fiscal fourth quarter.

The Boston-based company reported that the loan volume fell to $268 million as of June 30 from $792 million a year earlier.

First Marblehead shares declined 34 cents, or 8.6 percent, to $3.61 in trading Thursday.

On Monday, the stock climbed $2.14, to $5.14, after First Marblehead announced that Goldman Sachs Group Inc. had completed a $132.7 million cash investment in the company. First Marblehead also said Monday that Jack Kopnisky, its chief executive officer and president, will resign Aug. 31 and be replaced by Daniel Meyers, one of the company's founders, who left three years ago.

First Marblehead receives fees for helping banks package into bonds their private student loans -- those not backed by the government and carrying higher interest rates. The bonds are then sold to investors, who have become increasingly unwilling to buy as credit turmoil that started in the housing market has spread to areas including the $85 billion student loan market, which has seen rising defaults among student borrowers.

The troubles have sent First Marblehead's shares plunging from around $40 last fall.

The company reported Monday that it swung to a loss in both the fiscal fourth quarter ended June 30 and in fiscal 2008. Its fourth-quarter loss was $56.6 million, or 57 cents a share, compared with profit of $78 million, or 83 cents a share, in the year-earlier period.

For the full fiscal year, First Marblehead posted a loss of $235.1 million, or $2.46 a share, compared with profit of $371.3 million, or $3.92 a share, in fiscal 2007.

In April an organization called The Education Resources Institute, or TERI, which provided guarantees to bond investors for billions in private student loans, filed for bankruptcy protection -- a move that shifted credit risk back to First Marblehead. The TERI bankruptcy filing prompted Bank of America Corp. to cancel its business with First Marblehead. The bank had been the company's second-biggest customer, accounting for about 15 percent of First Marblehead's $881 million in revenue last year.

First Marblehead slashed 500 jobs, or more than half its work force, in May in a move to save $200 million a year.