First Marblehead reports first-quarter loss
First Marblehead Corp., a Boston company focused on the student loan business, said it swung to a $92.9 million loss in its first quarter amid a troubled market for securities tied to student loans.
The company issued results after earlier disclosing yesterday that it would cut about 24 percent of its full-time work force.
The loss for First Marblehead in its latest quarter, which ended Sept. 30, worked out to 94 cents a share, compared with profit of $168.8 million, or $1.80 a share, in the first quarter of fiscal 2008 a year earlier.
Analysts polled by Thomson Reuters had forecast, on average, a loss of 6 cents a share in the latest quarter. Analysts' estimates typically exclude one-time items.
First Marblehead receives fees for helping banks package their private student loans into bonds, which are then sold to investors. Private student loans aren't guaranteed by the government and carry higher interest rates. Investors in recent months have become wary of buying the bonds as defaults among student loans have risen.
The company also reported yesterday that processing fees dropped to $2.4 million in the first quarter from $46.2 million a year earier, reflecting the falloff in its activity.
First Marblehead said it didn't complete any securitization transactions during the latest quarter, as opposed to completing two in the year-earlier quarter.
The company said it has slashed around 24 percent of its full-time work force, which had 368 employees as of June 30. The new reductions affect workers at the Boston headquarters and at a processing center in suburban Medford, Mass.
In May, First Marblehead cut 500 jobs, or more than half its work force. Layoffs and attrition had already reduced the company's work force from about 1,000 in the summer of 2007.
"The illiquidity of the capital markets continues to negatively impact our financial results," Daniel Meyers, the company's chief executive and president, said in a statement. "We have scaled back expenditures significantly to reduce our operating costs."
The company said compensation and benefits expenses declined to $15.3 million in the latest quarter from $32 million a year earlier, while general and administrative expenses fell to $24.4 million from $65.5 million.
First Marblehead shares fell 9 cents, or 6 percent, to $1.43 in early afternoon trading today on the New York Stock Exchange. They have traded between $1.17 and $36.10 over the past 52 weeks. (AP)
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