February 9, 2009 / 2:22 PM / in 10 years

UPDATE 1-MRU Holdings files for bankruptcy under Chapter 7

(Recasts, adds details)

Feb 9 (Reuters) - Student lender MRU Holdings Inc UNCL.O said it filed to liquidate its business under Chapter 7 and suspended all its operations.

On Feb. 3, the company got an acceleration notice from Longview Marquis Master Fund LP asking to pay immediately $11.2 million due under its senior secured notes as it breached a debt covenant, MRU said in a regulatory filing.

The covenant called for lowering of the company’s receivables to $5 million by an extended date of Jan. 28, the company said.

The $85 billion student loan market has been one of the many victims of the credit crisis in the United States. Many student lenders get money for making new loans by selling off old loans to investors in a process known as debt securitization.

But the subprime mortgage crisis has chased many investors out of the market for securitized debt. Moreover, laws cutting subsidies to such lenders has left these companies struggling for existence.

MRU had assets of $11 million compared with liabilities of $45.7 million, according to court documents.

The company, which provides students with funds for higher education, said it expects the Southern District of New York to promptly appoint a bankruptcy trustee. (Reporting by Supantha Mukherjee in Bangalore; Editing by Jarshad Kakkrakandy)

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