August 21, 2008 / 9:19 PM / 10 years ago

UPDATE 2-First Marblehead posts quarterly loss, shares fall

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Aug 21 (Reuters) - First Marblehead Corp FMD.N, one of the largest securitizers of student loans, swung to a quarterly loss, hurt by lesser demand for private student loans and the bankruptcy of a non-profit group that guaranteed its offerings, sending its shares down 8 percent.

The company, which will have its co-founder return as chief executive in September, has been hit hard by student loan losses and a frozen asset-backed securities market, and has recently completed an equity investment by Goldman Sachs (GS.N) fund.

First Marblehead said net loss for the fourth quarter was $56.7 million, or 57 cents a share, compared with net income of $78.0 million, or 83 cents a share, a year ago.

Two analysts on average had expected the company to post a loss of 53 cents a share, according to Reuters Estimates.

The Boston-based company posted negative total service revenue of $40.4 million, falling significantly from the positive $197.1 million in the year-ago period.

An analyst had expected the company to post negative revenue of $24.1 million.

Revenue declined primarily due to illiquidity in the financing market for private student loans, leading to First Marblehead’s inability to complete a securitization transaction during the last three quarters, the company said in a statement.

Facilitated loan volume that was available to the company for securitization fell 66 percent to $268 million in the quarter.

Shares of the company were trading fell as much as 30 cents to $3.31 after the bell. They closed down nearly 9 percent at $3.61 in regular trading Thursday on the New York Stock Exchange.

The stock has fallen 88 percent in the last 12 months. The company, which for years has made its living by packaging loans originated by other banks into securities, saw its shares reach a high of $41.77 last October. (Reporting by Sweta Singh in Bangalore; Editing by Gopakumar Warrier)

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