First Marblehead shares fall after quarterly loss

NEW YORK (AP) _ First Marblehead Corp. shares fell sharply Friday after the student-loan services provider reported a quarterly loss, as the market for bundles of loans stayed frozen.

The Boston company's stock dropped 25 cents, or 7 percent, to $3.47 in afternoon trading. In the past year, it has ranged from $3.12 to $42.50.

First Marblehead swung to a fiscal third-quarter loss of $229.6 million and the per-share result badly missed analyst estimates. The company took a $315 million write-down on the value of service receivables, which is deteriorating as delinquencies increase.

First Marblehead did not complete a single securitization transaction in the quarter — previously its primary source of revenue. Securitization refers to bundling student loans and selling slices of that group to securities investors.

Goldman Sachs analyst James Fotheringham said he does not expect the company to get any securitizations in the fiscal fourth quarter. He cut his fiscal-year target to a loss of 68 cents per share from a previous forecast of a profit of $1.20.

The company also said that its biggest customers may stop doing business with it after The Education Resources Institute Inc. filed for bankruptcy. The Boston-based nonprofit, best known as TERI, provides guarantees for more than $16 billion in nongovernment student loans, pledging to cover unpaid loans and offer security to bond investors who purchase student loans bundled into securities.

The filing shifted risk back to First Marblehead and prompted Bank of America Corp. to drop the company. On Thursday, First Marblehead said JPMorgan Chase and other customers may also stop doing business with the company.