NORTH PROVIDENCE – The owner of Union Federal Savings Bank says it has restructured some of the distressed North Providence lender’s liabilities in the hope of making the bank more appealing to a buyer.
The First Marblehead Corp., Union Federal’s Boston-based parent, had acknowledged last year that it was considering “strategic alternatives” for the one-branch bank it acquired in 2006, including selling it.
In a regulatory filing on Tuesday, First Marblehead said it has substituted the corporation in place of the bank in a credit arrangement that had allowed Union Federal to temporarily fund private student loans before they were packaged and sold to investors.
“By eliminating Union Federal’s ongoing duties and potential contingent liabilities related to the [credit arrangement], [First Marblehead] believes the restructuring will make Union Federal more attractive to potential purchasers,” First Marblehead said in the Securities and Exchange Commission filing.
As part of the restructuring, First Marblehead said it also is indirectly contributing $6.5 million in cash and about $6.9 million worth of private student loans to the credit arrangement.
Union Federal, which specialized in making private student loans, was battered by the financial market upheaval that disrupted student loan programs nationwide starting in late 2007.
Last year, First Marblehead said Union Federal had been unable to package and sell the student loans it originated to investors since September 2007 “due to severe and continuing disruption in the securitization markets.”
In July, the U.S. Office of Thrift Supervision, which oversees federal savings banks, ordered Union Federal to shrink its loan portfolio.
In October, Union Federal sold $234 million in risky student loans for about half of their value to Wells Fargo & Co. A month later, the bank sold the last of its student loans, about $6.6 million worth, to a trust affiliated with First Marblehead.
Federal regulators have since lifted a cease and desist order against Union Federal that had prevented it from originating student loans.
Additional information is available at unionfsb.com.
