The student-loan servicer Navient on Thursday appointed two new board members as part of an agreement with the activist hedge fund Canyon Capital, at a tense but otherwise perfunctory annual shareholder meeting at its Wilmington headquarters.
After a rejected offer to buy and take the company private, Canyon Capital built up a roughly 10.5 percent equity stake in Navient, the nation’s third-largest student-loan servicer. Unhappy with the company’s performance, the hedge fund has been agitating for the student-loan servicer and collections company to boost its share price.
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Canyon agreed to withdraw its slate of director nominees and to vote in favor of the slate of 11 director nominees. Only one shareholder, with the Keystone Mountain Lakes carpenters union, asked a question. The new board, compensation packages for executives, and the accounting firm KPMG’s appointment passed the shareholders’ vote without incident.
Canyon representatives attended the meeting Thursday but posed no questions.
On Thursday, police officers and private security were stationed at Navient’s entryway at the 123 Justison St. building for the 8 a.m. annual shareholders meeting, and they screened all visitors with handheld metal detectors. No recording devices were allowed at the meeting.
Roughly 30 people including new board members Marjorie Bowen and Larry Klane attended the meeting, which was led by newly elected board chair Linda Mills.
Navient has been under scrutiny for its customer service and is fighting lawsuits from the U.S. government, schoolteachers, and multiple state attorneys general who say the company has routinely mistreated customers. Now Navient is contending with critics on a new front: shareholders such as Canyon, BlackRock, and the mutual fund giant Vanguard.
Navient ranks just after FedLoan and the merged Great Lakes-Nelnet as the third-largest student-loan servicers in the United States.
But Navient is a publicly traded company, unlike FedLoan, which is run by state-sponsored PHEAA, the Pennsylvania Higher Education Assistance Agency. Together those two service 47 percent of the nation’s $1.5 trillion in student loans. Most student borrowers know them on statements as Navient and FedLoan.
Navient’s customer-service ratings have been mixed.
LendEDU, an online marketplace for student loans and other financial products, analyzed borrowers’ complaints and found that Navient had the worst record, with 2,239 complaints in 2018. Still, that represented a 64 percent drop in complaints from 6,274 the prior year.
Canyon’s battle with Navient has drawn into sharp relief how this student-loan servicer has two very different constituencies: college loan borrowers and public shareholders.
Navient’s stated mission is to service increasingly complex student loans, and much of its massive portfolio is backed by the U.S. government. Servicers including PHEAA have complained they aren’t paid enough by the feds to adequately help borrowers.
Meanwhile, Navient has come under pressure from Canyon and other Wall Street investors to spend hundreds of millions of dollars purchasing its own stock, rather than spending on acquisitions, technology, or better customer service.
Navient’s stock price has languished under CEO John “Jack” Remondi’s leadership. After it spun off from the student-loan lender Sallie Mae in 2014, Navient’s stock price has dropped 14 percent, while the S&P 500 has gained 67 percent.
Analysts point to Navient’s high operating expenses at a time when the company’s loan business is shrinking. Remondi, meanwhile, has profited handsomely.