A prominent figure in student loan securitization, Paul B. Sheldon, left Citigroup Global Markets just over a week ago, sources confirmed last week. His departure came several days before the investment bank announced a massive cost-cutting campaign.
Sheldon, who joined Citigroup in 1991, was a managing director and co-head of its student loan group. Aside from overseeing publicly offered debt, Sheldon handled the acquisition of student loan businesses, as well as the sale and purchase of whole loans. He also promoted financing early childhood education loans through securitization, and applied the technique to the $750 million Southwest ECD Acceptance Corp transaction, proposed last October.
Sheldon had managed the group, along with fellow co-head Mark Weavick, since 2002, according to market sources. Although the bank declined to comment, sources familiar with the situation say the news rubbed some of his industry colleagues the wrong way.
"Some said it was a stupid thing for Citigroup to do because Paul was a valuable member of their team," said one source familiar with the bank. He added that Citigroup has been very competitive among student loan ABS lead managers for several years running, usually placing at least third in league table rankings by sector.
Indeed, Citigroup finished 2006 with more than $11.9 billion in student loan ABS mandates, snatching 19.2% of the overall SLABS market, according to Thomson Financial and ASR data.
Some market participants hinted that Sheldon's departure was a cost-savings move. Citigroup confirmed last week it would cut 17,000 jobs, or 5% of its workforce, as well as move more than 9,500 jobs to "lower-cost locations, both domestically and internationally," as part of its first restructuring plan in a decade. In its strategic structural review, Citigroup's CEO Charles Prince said the company is expected to generate total expense savings of approximately $2.1 billion in 2007, $3.7 billion in 2008, and $4.6 billion in 2009.
The bank expects to eliminate several layers of management; consolidate certain back-office, middle-office and corporate functions at the business, regional and headquarters levels; increase the use of shared services; expand centralized procurement; and rationalize operational spending on technology.
New York City, where Citigroup is the largest private employer is expected to lose 1,600 posts. Another 200 cuts are expected throughout the state, says Michael Hanretta, a Citi spokesman, although he said: "We remain committed to New York. Given our growth and investment plans, and the need to have appropriate staffing to support these plans, we will continue to hire in New York."
Some industry analysts, however, say Citi's move was just a well-orchestrated media blitz designed to assuage shareholders who had become jittery about its escalating costs.
"The bottom line is that the market was in demand of a statement from Citi, and they got one," said Richard Bove, an analyst at Punk, Ziegel & Co. "Investors wanted to be assured they were going to do something to cut costs. But are they doing something meaningful to cut expenses? I don't think so."
Bove says that the plan they put forth is just a reiteration of what Citi has been doing in the last couple of years.
"It's just a continuation of their program," he said. "One thing you can be sure of is that you will never know what they did or see a tangible number saying they succeeded or haven't succeeded. On Jan. 1, 2008, Citi will have more people working for them than today, and their expenses will be higher than today." -
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