First Marblehead(FMD), which we wrote about several years ago when securitizations were still possible and the stock price was far higher, has muddled its way through the financial crisis. Cash-rich, but still without any significant traction in its core business, the company announced it will be buying the tuition management systems business of KeyBank, for $47,250,000 in cash.
The division, which manages tuition planning and collection for over 1200 schools of all levels, should be a good fit. The companies should be able to leverage each others relationships with schools to cross market their products, and First Marblehead’s loans may be an attractive new option for some of Tuition Management Systems’ customers. The transaction is expected to close before year end, and be cash flow positive in 2011, adding $31 million in revenue annually.
It will be interesting to see the steps First Marblehead takes as it continues to evolve to a business model that works in the current environment.
The complete asset sale agreement can be found here.
Disclosure: The author owns shares of FMD
Very interesting II, have you heard anything on an opening up of the student loan securitization market? I have been reading good news on car loans securitization, and I am following a couple of them (CPSS, UPFC)
I haven’t heard anything, and FMD certainly hasn’t done one yet. This move should lessen their reliance on that model, but if they can pull off a securitization, it would be unexpected and move the stock, I would think. The story right now is more about a transition to servicing though. What’s your thought on the stock?
I have not done the heavy lifting, but I imagine that there is pent-up cash flow in the retained interest in the securitizations plus as you say the wild card of the opening up of the securitization market.
I remember also that the provider of their database went BK or something? I was going to ask if you had an opinion on that
TERI went bankrupt. They were both the source of historical data, and the guarantor on the securitizations. The bankruptcy case was settled in the past few months, I believe, but obviously, this was a negative for FMD.
Hey – I tried to find a way through this website to send you a private message but couldn’t find anything. I’m sure you get a lot of spam. I sent you a message through Seeking Alpha, but I’m not sure whether you still check that account. I wanted to talk with you about an old post you wrote about CTO in 2006.
Best regards,
Chris