Directors feel First Marblehead’s pain

It has been an especially tough couple weeks for Leslie Alexander, the largest shareholder of The First Marblehead Corporation, a packager of student loans.

Alexander owns the Houston Rockets of the NBA. He also controls more than 18.2 million shares of First Marblehead stock.
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That means he has lost, on paper, roughly $300 million since Nov. 30 when the company’s shares traded at about $30. They closed last week at about $13.50.

Compounding the misery, the company recently cut its quarterly dividend by 15.5 cents a share, costing Alexander about $2.8 million a quarter in dividend payments.

He’s not the only member of First Marblehead’s board of directors with big paper declines. Company co-founder and vice chairman Stephen Anbinder owns roughly 3 million shares and director William Berkley owns about 5 million shares, according to the company’s annual proxy statement dated Oct. 5.

According to insider filings, Alexander has not sold shares since last year. Berkley last sold in February.

Anbinder has sold a total of more than 700,000 shares in frequent and regular trades this year at prices ranging from more than $50 a share early in the year to $13.60 for some shares last week.

First Marblehead, like many companies involved in lending, is experiencing fallout from the credit crunch. There is concern about growing defaults among student borrowers making it difficult to package loans into structured securities, the core of the company’s business.

While the company’s stock price has trended down since the beginning of the year when it traded at about $56 a share, business seemed to be fine until recently.

In its first fiscal quarter of 2008, ending Sept. 30, the company reported net income of $168.2 million compared to $141 million in the comparable quarter the previous year.

According to the company proxy, the top two officers each received cash incentive payments of $2.5 million in fiscal 2007 (ended June 30), in addition to their $800,000 salaries.

Chairman and general counsel Peter Tarr received a total of $4.3 million in compensation and CEO Jack Kopnisky received nearly $4.1 million.

Neither has the stock exposure of fellow directors Alexander, Anbinder and Berkley. Kopinsky owns about 57,000 shares and Tarr about 103,000, according to the proxy.

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