First Marblehead Cuts Dividend

Shares of First Marblehead(FMD Quote - Cramer on FMD - Stock Picks) plummeted more than 12% on Friday after the company said it would slash its dividend and suspend securitization of student loans.

The company declared a 12-cent-a-share quarterly cash dividend, down from 27.5 cents a share in the prior quarter. The dividend is payable Dec. 21 to shareholders of record at the close of trading Dec. 17.

In a statement, CEO and President Jack Kopnisky said First Marblehead will not securitize new loans in the current quarter and possibly beyond, due to "uneconomic terms in the current capital markets."

"We are exploring non-securitization and securitization alternatives for future quarters to enhance our business model and provide long-term capacity to the private student loan market in a manner that benefits our shareholders," Kopinsky said. "Our business volumes remain strong and we see many opportunities to facilitate and process private student loans. Our Board of Directors determined it was prudent to continue to return capital to our shareholders this quarter even during these challenging times."

Shares hit a low of $15.69 on the news Friday morning. More recently, shares were down 8.1% to $16.50, still below its 52-week low of $16.92.

First Marblehead shares have lost 45% of their value since the Nov. 30 close of $30.01 on a string of bad news.

Moody's Investor Service earlier this week said that it's reviewing 16 tranches of the student lender's deals for possible downgrade. A Sandler O'Neill analyst responded by downgrading the stock to hold from buy, predicting the company would not securitize loans this month and could suspend its dividend.

Analyst Michael Taiano also questioned the ability of the company to weather a "prolonged liquidity crunch," even as he maintained a generally positive view of the long-term growth trends of private student loans.