Comments on FIG Junkie's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/fig-junkie/articles http://seekingalpha.com/article/52700-first-marblehead-worth-10-or-60?source=feed#comment-134555 134555 Tue, 01 Apr 2008 11:17:59 -0400 http://seekingalpha.com/article/52700-first-marblehead-worth-10-or-60?source=feed#comment-103190 103190 Tue, 27 Nov 2007 13:11:42 -0500 http://seekingalpha.com/article/52700-first-marblehead-worth-10-or-60?source=feed#comment-100987 100987 Mon, 05 Nov 2007 13:43:09 -0500
Also, their latest securitization came during the doldrums of the credit crunch in September, yet they exceeded expectations regarding the size of the deal and the yields they received. (Consensus analyst expectations were consistently revised upward after FMD released its preliminary deal size and fee estimates.)

While prepayment risk in the trusts is a concern, the debt is generally floating rate, so I wouldn't think the debt investors in those trust are too concerned about reinvestment risk anyway. (Of course, prepayments could lower FMD's residual takes.) And, for the average student loan in the trust to be worthless, you'd need to see the student default, then the co-signors, then TERI (which guarantees the loans).

Also, as regards undercollateralization of the trusts, this "seems" (to me) to be worse than it is, as the loans generally acrue non-cash interest while the kid is in school. This non-cash interest gets applied to the loan balance. So, the undercollateralization rectifies itself reasonably quickly, as the non-cash interest increases the size of the trust assets relative to liabilities.

I'd put a no-growth value on FMD's FY07 results at about $45-$50 per share. And that's a no-growth assumption in the private student loan industry, which will benefit seemingly indefinitely from the 1) increased demand for higher education; 2) large and growing funding gap between federal assistance and the actual cost of higher-level education; and 3) higher-level education inflation, which has been (and looks to continue) growing significantly faster than personal incomes.

FMD is a high-growth business being valued like it's going out of business. I just don't see that happening. (And we haven't even discussed its plans to use its connections with students to offer other financial products like banking services, insurance, credit cards, etc. to further leverage its processing infrastructure and connections with students.)

Needless to say, I'm long FMD.]]>