PhillyDeals: Student-loan bankers angry over U.S. takeover of program

When the government cuts corporate welfare, the business sector's loss is the taxpayers' gain.

Still, "it's tough when somebody eliminates 90 percent of your business through legislative mandate," Christopher Chapman, president and chief executive of Access Group Inc. in Wilmington, told me.

The U.S. Senate voted last week to cut private lenders from its subsidized student-loan programs.

Under the new law, students would borrow directly from the government, at the same interest rates - currently 6 percent to 8.5 percent - but at a lower cost to the U.S. Treasury.

That's because the government can borrow money more cheaply than private companies. The United States is not passing the savings on to students, but using it to trim the deficit.

The largest for-profit student lender, Student Loan Marketing Corp. (Sallie Mae), plans to respond by cutting 2,500 of its 8,600 jobs, and close up to 20 of its 25 U.S. office centers, spokeswoman Martha Holler told me. She wouldn't say which office centers.

But Reston, Va.-based Sallie Mae will still make millions from other kinds of loans, and servicing government loans, and taking over loans from lenders that are leaving the business, FBR Capital Markets analysts Matt Snowling and Bill Jackson told clients in a report.

Access has already cut 50 workers as the volume of new loans drops, and is trying to keep the other 365 staffers busy servicing old loans, Chapman told me.

Why should the public miss the private lenders? "We spent $4 million or $5 million a year providing borrower education to students and training for admissions officers," Chapman told me.

I reminded him that scandals over gifts to college admissions staff by lenders made the student-loan industry unpopular.

But the government's cure "completely eliminates competition," Chapman warned. "The loans will now be processed by low-bid contractors."

A lot of building owners - and some homeowners - will be playing a version of this game with their bankers until property prices recover:

The white, square 27-story tower at 1650 Arch St., between the Comcast Center and the old Insurance Co. of North America building (now the Phoenix residences), has been one-third vacant since law firm WolfBlock L.L.P. closed last year.

The vacancy "presented challenges," as owner Behringer Harvard, a Dallas office landlord, put it in a public statement last month.

So Behringer stopped paying the mortgage and defaulted on $9.5 million it owed its banks on the property, according to data from Realpoint L.L.C., of Horsham.

A second company controlled by Behringer bought the rest of the loan, $42.8 million, last month, and at a discount, Behringer told the Securities and Exchange Commission in its annual report.

Behringer now promises "significant capital improvements in 1650 Arch Street this year, including lobby and exterior renovations and upgrades to the elevator and mechanical system," as it tries to fill the empty space and pay off the rest of what it owes before it is due in 2012.

Tengion Inc., the East Norriton-based company that is working to make replacement kidneys and bladders from cells, plans to sell around five million shares in an initial public stock offering "as soon as practicable after the effective date of this registration statement," the company said in an SEC filing Friday.

A successful sale would enrich Tengion executives, headed by chief executive Steven Nichtberger, and also directors, consultants and others who bought or were granted a total of more than 30 million shares, at $1.82 each, from 2007 to 2009.

It would also boost investment funds, including a unit of Johnson & Johnson, and Ira Lubert's Philadelphia-based Quaker BioVentures fund, which owns about 8 percent of Tengion.

Tengion burned through around $100 million in the past three years. Piper Jaffray & Co. and Leerink Swann L.L.C. are comanaging the sale.

Veteran Philadelphia communications-investment banker Eric Meltzer says Broadband Ventures II, a fund set up by his firm, Telecom Capital Corp., has closed a deal to acquire Charles Street Partners, a Baltimore firm that serves 6,500 wireless Internet users on the Eastern Shore of the Chesapeake and in Arizona, from Boston-based J. Barclay Knapp's Abry Partners.

"In remote areas, where you don't have Verizon FiOS or Comcast, [Charles Street] provides Internet access," Meltzer told me.

Telecom Capital, Abry and other investors have put a total of $17 million into Charles. The company plans to apply for up to $20 million more from the Rural Utilities Service of the U.S. Department of Agriculture to extend Internet to people who don't have it, with help from President Obama's economic stimulus program.