First Marblehead (FMD) in Boston has agreed to sell $53.9 million of private student loans to RBS Citizens Financial Group in Providence, R.I.
The sale represents roughly 73% of the private student loans held by First Marblehead's bank, Union Federal, according to the company's Thursday regulatory filing. Union Federal will receive 103.5% of principal in the deal.
"We believe these transactions, conducted at a premium to book value, confirms the liquidity available in the private student loan marketplace and reinforces our decision to generate high credit quality loans," First Marblehead Chairman and Chief Executive Daniel Meyers said in a Thursday press release. "We also believe that this transaction creates more balance sheet capacity at Union Federal."
The $492 million-asset First Marblehead specializes in providing private student lending services to banks, credit unions and schools. The deal bodes well for the company's future, according to Sandler O'Neill analysts Christopher Donat and Robert Haderer.
"We have held the view for two years that First Marblehead needs to either access the securitization markets or sign more partnerships like the one it has with SunTrust," the analysts wrote in a Friday company note, referring to First Marblehead's role as a third-party administrator of SunTrust Banks' (STI) student loans.
"The loan sale to RBS Citizens could represent a third alternative to enable First Marblehead to scale its origination engine," Donat and Haderer wrote. "At this time we are not predicting any future loan sales, but we believe that such sales are now more likely."
The news comes in the wake of RBS Citizens' decision to begin offering private student loan refinancing. Eligible graduates will be able to apply for loans to refinance and consolidate their debt at interest rates as low as 5.24%, the company announced in January. The $130 billion-asset RBS Citizens is the U.S. banking unit of the Royal Bank of Scotland.
First Marblehead plans to begin operating under the name Collegiate Trust Corp. by June 30.