Nelnet Inc. (NNI) has acquired theresidual interest in $1.9 billion of Federal Family Education Loan Program (FFELP) consolidation loans from an affiliate of Greystone & Co. Inc. The deal terms were not disclosed. This acquisition is projected to be immediately accretive to the company’s base net income.
Nelnet obtained the ownership interest in GCO SLIMS Trust-1 (SLIMS Trust), which bestowed the company rights to the residual interest in GCO Education Loan Funding Trust-I (Trust-I). Per the deal, Nelnet will become the master servicer and administrator for Trust-I and administrator for the SLIMS Trust.
The acquisition is anticipated to augment Nelnet’s student loan portfolio to more than $25 billion. As of March 31, 2011, the company had $23.5 billion in net student loan assets.
Nelnet’s first quarter 2011 earnings of $1.09, excluding items, surpassed the Zacks Consensus Estimate of $1.06 per share based on its benefits of revenue diversification through fee-based businesses, a drop in operating expenses and loan loss provisions. Concurrent to the earnings release, the company announced a 3-cent hike in its quarterly dividend to 10 cents.
Although the student loan reform law forbids companies like Nelnet and SLM Corp. (SLM), better known as Sallie Mae, from originating federal student loans since July 2010, Nelnet’s strategy of business diversification augur well.
Increasing revenues from its fee-based business and servicing of loans for the Education department should support its earnings. Its capital position is solid. However, concerns over implementation of the recent financial reform act and a protracted economic recovery remain. Expenses are also expected to increase with a rise in the volume of loan servicing. Yet, the dividend increase gives a boost to investors’ confidence.
Nelnet shares currently have a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.
NELNET INC CL-A (NNI): Free Stock Analysis Report
Be the first to comment