Securities Available For Sale

9 Months Ended

Sep. 30, 2012

Available-for-sale Securities [Abstract]

Securities Available For Sale

Securities Available For Sale

The Company’s securities available for sale consist of auction rate securities, which represent interests in pools of student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and a structured finance security. The structured finance security has an attached credit default swap under which the principal value of the structured finance security would be partially or fully forfeited at net default rates on the underlying corporate debt obligations ranging from 8% to 9%. The net default rate as of September 30, 2012 was estimated to be 6.23%. Both the structured finance security and the credit default swap are collateralized by investment grade credit-linked notes made up of floating rate international bank notes.

Due to liquidity issues in the auction rate securities market, there was insufficient observable market data to determine the fair values of the Company’s auction rate securities as of September 30, 2012 or December 31, 2011. Therefore, their respective fair values were estimated by an independent valuation firm, Houlihan Capital Advisors, LLC, using a probability weighted discounted cash flow model. This valuation is sensitive to market conditions and management’s judgment and can change significantly based on the assumptions used. The following tables set forth the fair values of the Company’s auction rate securities by type of security and underlying credit rating as of the dates indicated (in millions):

	Underlying Credit Rating (1)
As of September 30, 2012	AAA		BB		CCC		Total
Student loans	$	9.1	$	2.6	$	—	$	11.7
Structured finance securities	—		—		2.4		2.4
Total auction rate securities	$	9.1	$	2.6	$	2.4	$	14.1

	Underlying Credit Rating (1)
As of December 31, 2011	AAA		CCC		Total
Student loans	$	11.9	$	—	$	11.9
Structured finance securities	—		1.7		1.7
Total auction rate securities	$	11.9	$	1.7	$	13.6

(1) The Company’s auction rate securities maintain split ratings. For purposes of this table, securities are categorized according to their lowest rating.

As of September 30, 2012, the yields on the Company’s auction-rate securities ranged from 1.50% to 2.48%. These yields represent the predetermined “maximum” reset rates that occur upon auction failures according to the specific terms within each security’s governing documents. The issuers have been making interest payments when due.

Auction Rate Securities – Other Than Temporary Losses

The Company’s structured finance security, for which cumulative credit losses of $3.3 million have been recognized through September 30, 2012, had a par value of $5.0 million and a cost basis of $1.7 million as of September 30, 2012. If unrealized losses are believed to be other-than-temporary, an impairment charge is recorded. There were no other-than-temporary impairment charges recognized for the three or nine months ended September 30, 2012. For each of the three and nine months ended September 30, 2011, the Company recognized $0.5 million of other-than-temporary impairment losses in earnings, with a corresponding reduction in the cost basis of the Company’s structured finance auction rate security.

Auction Rate Securities – Reconciliation of Cost Basis to Fair Value    

The Company's student loan auction rate securities have been in a continuous unrealized loss position for over twelve months. The cost basis, gross cumulative unrealized (losses) gains and estimated fair values of the Company’s auction rate securities as of the dates indicated were as follows (in millions):

	September 30, 2012
	Adjusted  Cost Basis (1)		Gross Cumulative Unrealized (Losses)/Gains			Fair Value
Auction rate securities – student loans	$	12.9	$	(1.2	)	$	11.7
Auction rate securities – structured finance securities	1.7		0.7			2.4
Total auction rate securities	$	14.6	$	(0.5	)	$	14.1
	December 31, 2011
	Adjusted Cost Basis (1)		Gross Cumulative    Unrealized (Losses) Gains			Fair Value
Auction rate securities – student loans	$	12.9	$	(1.0	)	$	11.9
Auction rate securities – structured finance securities	1.7		—			1.7
Total auction rate securities	$	14.6	$	(1.0	)	$	13.6

(1) Adjusted cost basis reflects adjustments for credit and other losses recognized in earnings. Cumulative adjustments to the cost basis of securities held as of both September 30, 2012 and December 31, 2011 totaled $3.3 million. Par value of securities held as of both September 30, 2012 and December 31, 2011 was $17.9 million.

As of September 30, 2012, contractual maturities of the Company’s student loan auction rate securities ranged from 15 to 35 years, and for the structured finance security, 4 years.