SOURCE: The First Marblehead Corporation

May 05, 2008 10:05 ET

First Marblehead Streamlines Operations; Reduces Operating Expenses

BOSTON, MA--(Marketwire - May 5, 2008) - The First Marblehead Corporation (NYSE: FMD) today announced steps it is taking to reposition itself in a volatile student loan market, including a reduction in operating expenses and a streamlining of operations.

"We believe that the private student loan market will continue to fill a vital niche in helping students achieve their education dreams," said First Marblehead CEO and President Jack Kopnisky. "The cost of college is rising, federal aid is not keeping pace, families of college-eligible students are saving less, and more students than ever are going to college. Our model going forward will leverage our marketing coordination services, processing, and capital markets expertise to facilitate our planned transition into a diversified education finance products and services company to serve students and their families. Today, we are making the difficult operational decisions we believe will position us to best take advantage of these opportunities."

Kopnisky said First Marblehead plans to further reduce operating expenses related to its student loan business as a result of the sudden and unexpected voluntary bankruptcy petition by The Education Resources Institute (TERI), followed by a major client's decision to exit the private student loan industry and terminate its relationship with the company as well as the continued disruption in the capital markets. Under the plan, First Marblehead expects to lower its operating expenses by approximately $200 million (before tax) on an annualized basis and has eliminated approximately 500 positions at all levels of the company including management and executive positions.

"This has been an extraordinarily challenging business environment for our company. The market and credit conditions have not improved and TERI's bankruptcy filing has forced our business situation to change quickly," Kopnisky said. "We have taken many steps to move our company forward. Our action plan includes prudent expense management and streamlining our business operations. We are taking the necessary actions to operate the company efficiently in this environment. Although it is not easy, it also is necessary to make a significant reduction in our workforce at this time. We appreciate the affected employees' service to the company and will assist them with severance benefits, health care assistance and outplacement services," Kopnisky said.

The company will release its financial and operating results for the three-month and nine-month periods ended March 31, 2008 after market close on Thursday, May 8, 2008 and will host a conference call at 5:00 p.m. EDT that afternoon to discuss its results. Kopnisky and John A. Hupalo, Chief Financial Officer, will host the call.

Investors and other interested parties are invited to listen to the conference call via a simultaneous internet broadcast on the Company's Web site at www.firstmarblehead.com, under Investors, or by dialing (866) 356-4281 in the United States or (617) 597-5395 from abroad (pass code 83881784).

About The First Marblehead Corporation - First Marblehead provides financial solutions that help students achieve their dreams. The Company helps meet the growing demand for private education loans by providing national and regional financial institutions and educational institutions, as well as businesses and other enterprises, with an integrated suite of design, implementation and securitization services for student loan programs. First Marblehead supports responsible lending for borrowers and is a strong proponent of the smart borrowing principle, which encourages students to access scholarships, grants and federally guaranteed loans before considering private education loans. For more information, go to www.firstmarblehead.com.

Statements in this press release regarding First Marblehead's future business model and operating expense reductions, as well as any other statements that are not purely historical, constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon our plans and expectations as of May 5, 2008. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future results, plans or expectations contemplated by us will be achieved. You are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause actual performance, including future service offerings, facilitated loan volumes, revenues and operating expenses, or the timing of events, to be materially different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: our ability to develop alternatives to the loan guaranty and loan origination services that TERI has historically provided to our clients; our ability to identify, and negotiate agreements with, alternative private student loan guarantors; our success in designing, selling and implementing structural default reserves for future loan programs; the demand for, and market acceptance of, loan programs that are not TERI-guaranteed, including our success in providing such alternatives to former, current and prospective clients; our ability to facilitate the securitization of loans that are not TERI-guaranteed; our ability to retain key employees and effectively manage our operations following our workforce reduction; developments in TERI's reorganization in bankruptcy; our success in obtaining regulatory approvals to expand the scope of services that we perform directly for clients; and the other factors set forth under the caption "Item 1A. Risk Factors" in First Marblehead's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on February 11, 2008. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

Contact Information

  • Contact:

    Janice D. Walker
    Corporate Communications
    617-638-2047

    Lee Jacobson
    Investor Relations
    617-638-2065