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MRU Holdings has just unveiled the first private student loan
product, Preprime, geared for students without credit history/creditworthy
(OTC Bulletin Board: MHOI.OB)
MRU Holdings, Inc.
1114 Avenue of the Americas, 30th Floor
New York, NY 10036
Edwin J. McGuinn, Jr.
Chairman & CEO
Interview conducted by:
Lynn Fosse, Senior Editor
July 7, 2006
Edwin J. McGuinn, Jr.
Chairman & CEO
Joining co-founders Raza Khan and Vishal Garg in 2004, Ed McGuinn is chairman and chief
executive officer of MRU Holdings Inc., the specialty finance company that powers the
MyRichUncle brand. Ed brings the experience and knowledge that a career spanning
more than 30 years in dynamic financial markets can provide.
Since 1998, Ed has been involved in a number of entrepreneurial ventures, namely the
development of electronic trading systems for fixed income securities, as well as serving
as president and chief executive officer for two companies: Limitrader.com and eLOT, Inc.
(formerly known as Executone, Inc.).
Prior to his appointments and
from 1992-1997, Ed was senior managing director and head of the equity capital markets and
corporate finance for two investment banking boutiques specializing in consumer services,
health care and technology. Also a senior managing director for equity and equity-related
sales, research and trading at Mabon Securities, Ed orchestrated Rodman and Renshaws
purchase of Mabon Securities.
From 1981 to 1992, Ed was
managing director and a member of Lehman Brothers Fixed Income Operating Committee. While
at Lehman Brothers, he was responsible for developing global presence in domestic fixed
income arbitrage and international fixed income trading, sales and research.
A graduate of Colgate University,
Ed entered the MBA/CPA program at New York University, in which liberal arts students were
sponsored by major accounting firms to transition into Finance and Management consulting.
This led to a great tenure with what is now Ernst & Young, in the audit
and management consulting divisions.
spirit has been part of his career path all along. During the late 70s and early
80s, Ed ran a private snow removal company servicing Metro North. Ed was also
involved in the restaurant business, overseeing five restaurants in the Wall Street area
and two in suburbs of New York City, among them two of the largest in Manhattan: the
Hudson River Club and Morans.
Currently, Ed also sits on the
Board of Directors of eLOT, Inc. and Enigma Software, and on advisory boards of a venture
capital company and several development-stage companies specializing in financial
technology and Internet services. He has also lectured extensively on the topics of
electronic trading and best business practices for the financial services industry. In
addition, he is actively involved in several charitable organizations such as
Tuesdays Children (for children affected by the events of 9/11/01), Greenwich Youth
Lacrosse and several Colgate University-related organizations.
Ed received a Bachelor of Arts in Mathematics and
Economics from Colgate University and a Master of Science in Accounting from New York University.
He holds NASD Series 7, 8, and 24 licenses along with a CPA license from the State of New
York. He and his wife Donna reside in Greenwich, CT with their three children Michael,
Cristin, and Meghan.
MRU Holdings, Inc. (OTCBB: MHOI) is a publicly traded specialty finance company that
provides students with funds for higher education, and is the innovative force behind
MyRichUncle. Using a blend of FICOŽ-based underwriting practices and
its own proprietary analytic models and decision tools, MRU Holdings offers private and
federal loans to students on a principal basis through the MyRichUncle brand, at http://www.MyRichUncle.com. A highly scalable
origination infrastructure enables the company to develop progressive financial products
that facilitate a students ability to fund his or her education.
CEOCFO: Mr. McGuinn, what was your vision when you joined MRU
Holdings, and where are you today?
Mr. McGuinn: The vision for this company came from my
two partners, the president and CFO of MRU Holdings: Raza Khan and Vishal Garg,
respectively. Both of these young men are extraordinary, visionary businessmen who six
years ago embarked on the development of a new and much more holistic method of
underwriting educational finance products for college and graduate students. For the first
four years, they were developing their credit underwriting databases and the operating
technology, which we have just recently brought out to the marketplace. They created a
credit underwriting process that would enable this company to look at a student as more
than just a credit score and to look at borrowers educational tracks and student
behaviors, and consider these factors when lending.
The traditional competitors within this field are Sallie Mae and large banks, such as
Citibank and Key Bank. All of these financial intermediaries have historically used, for
student loans, what is essentially a credit card or a car loan underwriting engine, and
because students often do not have credit histories, this would require a parent to
co-sign the students loan. When students do not have credit histories or
creditworthy co-borrowers to co-sign their loans, they are usually denied funds by these
lenders. We saw an opportunity here. We are now very active in becoming a major
player in the private loan area of the educational financial industry.
To give you a quick overview, the overall educational spending for college and for
postgraduate education is about $225 billion, of which about $95 billion must be paid by
students and their parents. Private, as opposed to federal student loans are a $15 billion
subset of that $95 billion. Ten years ago, private loans barely existedthe market
has grown to $15 billion in just a decade. Therefore, we are talking about an enormous
growth rate and it is projected to grow at 30% per year over the next ten years. What has
created this gap between federal loans and grants and the total cost of education has been
runaway tuition increases, which have been averaging over 7% per year for the last ten
years, and a limit or cap set by the government on federal subsidized loans. That is a
broad overview of the industry and where we are at.
CEOCFO: Can you tell us
how your product compares to what is though of as the traditional student loan?
Mr. McGuinn: The traditional private student loan is a
loan in the students name, where more often than not, the parent is the guarantor of
the loan. The student is responsible for paying back the loan, but the parent co-signs the
loan because the student does not usually have an established credit history and the loan
would be too high-risk for lenders without the co-borrower. The traditional big players,
the banks and Sallie Mae, have not made any real efforts to try to fund those students who
do not have a credit history or a creditworthy co-borrower in a natural manner. We see
these un-served students as neglected. We consider them to be a demographic of borrowers
who have not yet had time to establish a credit history but who are on their way towards
establishing one. Our Preprime loan is a product that we just unveiled about 3 or 4
days ago, which is a loan to students who have not traditionally been able to obtain
financing because they lack a credit history or creditworthy co-borrower. Because these
students do not have the traditional borrower qualities used to underwrite loans, our
origination platform considers student behaviors and qualities such as area of study,
academic history, and educational institution, among others. This financing product is the
first of its kind in the marketplace, relevant to and needed by upwards of two million
students and we believe the market opportunity is in the area of $35 billion.
Right now our primary focus from a corporate
standpoint is to enable students to obtain funds. We offer students prime loans, and if
they do not have the necessary credit qualities, we can also offer our Preprime
product. Weve been making private student loans since May 2005 and just unveiled our
Preprime loan, which is, again, the first student loan of its kind in the
CEOCFO: How do you reach the students?
Mr. McGuinn: We actually have three different channels
through which we offer our product, and the most important for us is the direct to
consumer channel, our MyRichUncle brand. The MyRichUncle brand resonates best with
students, and parents appreciate that our funding comes from Merrill Lynch, and that we
are actually principals in the marketplace and not brokers. The word of mouth and the buzz
among the students relative to our brand has been quite spectacular and weve been
very pleased. Our second marketing channel is the school channel, where we have a team of
salespeople that are actively talking to financial aid offices at the various universities
and colleges. Lastly, we have an affinity sales channel, where we develop private
label-branded products on behalf of established banks or educational finance sales teams.
They may be very actively involved in federal consolidation products, which are guaranteed
by the Federal Government, but do not have the underwriting or the principal capabilities
to be involved in the private loan market. In that case, we are effectively using their
sales forces to represent our product in a particular school or educational finance
CEOCFO: In the prime market, why should students be
turning to the private rather than to some of the other sources and why MRU Holdings?
Mr. McGuinn: Private loans are an excellent source of
gap funding and offer flexibility to the borrower. When paying for college, students
should first and foremost, go after grants and scholarships. Federal loans and private
loans are the next route. With Federal loans moving to a fixed rate on July 1, 2006 (Stafford
moves to a fixed 6.8% and PLUS to a fixed 8.5%), it is imperative for a student to
understand the cost of what he or she needs to borrow to pay for education. In many cases,
a private loan may end up saving the student money. We offer extremely competitive rates
and a suite of loan products to fund the widest demographic of student borrowers.
CEOCFO: Why MyRichUncle?
Mr. McGuinn: Our operating focus is to provide better
rates for better students. Essentially, the underwriting models used in student lending
generally use conservative models that arent too different from those used for car
loans and mortgages. The result is limited individual pricing because the borrower is
being assessed within a limited tier set. This works for other lenders because they do not
run much risk, but it does not work for students who need funding. With MyRichUncle, we
have placed a stronger focus on knowing understanding our borrowers as individuals and
that gives us a significant competitive edge. Through innovation, we are able to be more
distinctive with regard to rates. Our ability to underwrite in this manner is
significant, as private loans today are averaging around $10,000 to $13,000, which is a
substantial investment for any student.
CEOCFO: Has your approach been tried before or is this a
totally new approach?
Mr. McGuinn: This is really a new approach to student
lending. We are setting a trend here. Student lending is one of the most dynamic areas of
consumer finance. The size and growth trajectory of the private loan market is driving
student lending in a new direction. We have a significant head start on other lenders. By
taking a more holistic view of students and creating innovative underwriting models, we
are in an exceptional position to develop market share. We certainly expect to see all of
our competitors focusing on what we are bringing to the marketplace.
CEOCFO: So you are ahead of the curve.
Mr. McGuinn: Yes!
CEOCFO: Funding for your Achiever Fund for the first to
market student loan product is primarily from European financial institutions; is there
any significance there?
Mr. McGuinn: We in the states dont always look at
consumer credit trends in Europe, but there is a very well-developed credit market in Europe.
There are many micro-payment loan strategies available to get financial data from; and
there is a very mature consumer loan market, but in some cases, it is not as well-branded
as what we see here with the likes of Citibank and J. P. Morgan Chase. We were approached
by a consortium of investors that have a tremendous amount of background in the European
finance circles, who were very interested in our operating mantra, better rates for
better students, and were very impressed with the granularity of our credit
underwriting models. Hence, they were interested in this marketplace. We do plan to
introduce United States financial institution investors into this structure, but this is
the kickoff and it certainly gives us the impetus to go ahead and get the product out at
the onset of this student loan season. The student loan market is a seasonal market that
starts in late April and runs through Labor Day. In April, students have just got into
school and they are getting notes from the Bursars as to what will have to be paid in July
or August. As such, students and families are beginning to look around to figure out
financing tourniquets they are going to have to use. They have to decide whether they are
going to take out federal loans, a private loan or some other personal finance decision
such as a home equity loan. There is also a much smaller season that starts in December
and January for people that are paying on a semester-to-semester basis.
CEOCFO: In closing, MRU Holdings is a public company; why
should investors be interested over and above what youve already said, what
doesnt jump off the page when people first look at you?
Mr. McGuinn: We are a public company, but certainly we
are a small company with seventy employees. We are blessed to have major financial
sponsors that are investors in the company such as Merrill Lynch Investment Managers
(MLIM) Private Equity Partners; and Nomura Holdings, one of the largest global
investment banking and securities firms is also a major investor in the company. We also
have Battery Ventures, which is one of the top ten venture capital companies; they are
very actively involved. We have strong financial sponsorship and lines of credit from
Merrill Lynch of $175 million; we also have $165 million from Nomura, which enables us to
act as a principal in the marketplace. As discussed, we have a very holistic and
forward-thinking underwriting model. We also have a strong management team that has a
great mix of educational finance experience along with traditional Wall Street
underwriting and capital markets capabilities. We have the MyRichUncle brand, which is
directed towards students as well as their parents. We are in a growth market; we have a
dynamic suite of products and we are the first lender to offer products that can fund the
Prime market as well as a demographic of students who have not yet established their
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