This headline out of Citibank on ESI must be a joke. Who would ever trust anything Citi wrote about anything in the first place. But, in case someone is dumb enough to go there, ESI said in its conference call that the $78 million reserve charge it took in the fourth quarter covers the 2009 RSA and the PEAKs program. The 2007 RSA got settled in full and is done. The face value for RSA and the Peaks programs are $141 million and $400 million. The $78 charge off ITT took covers a 60% default rate assumption on these programs. So the 60% default stuff is already behind ESI and taken care of. Remember that a 60% default rate does not mean that much of that 60% does not get collected. The 2007 RSA got settled in full for something like 25% of face value from tough negotiator SLM! Furthermore, ESI holds a note from the PEAKs program for about $75 million already. That means ESI has already given the Peaks program that much money, in addition to the above settlement. The PEAKs program will end up repaying ESI that $75 million note in a number of years.
So what is Citi talking about? They have no clue! They analyst either did not participate in the conference call, the analyst is being paid a huge amount of commissions by hedge funds who are short, or Citi is desperate to cover a short position for their own account with help from their "analyst".
And no one has said a word about the great news about ESI's cohort default rate!
Citi has shorted the stock and loosing face in front of rebound. There are getting short squeezed and trying to get stories out, getting desperate.... Piper Jeffrey is on the right side. Citi will get burned. Stock will go back to $20 and won't get back below in the short term...