SLM Corporation provides update of transaction and financial outlook
RESTON, Va.—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, today announced the following:
To address recent reports in the marketplace regarding the proposed buyout of Sallie Mae by a group led by J.C. Flowers, Bank of America and JP Morgan Chase, the company’s Board of Directors states the following:
* Over the past eight weeks, in a series of discussions between the company and senior representatives of the Flowers group, Sallie Mae has indicated that, to resolve the dispute between the parties, the company offered to consider an alternative transaction with the Flowers group, and to give them the opportunity to update their due diligence and submit a new proposal to acquire the company with no pre-conditions.
* The buyer’s group has indicated to Sallie Mae that it does not wish to pursue these opportunities.
* The Board remains committed to protecting the rights of our shareholders, and will pursue all available recourse, including the company’s existing lawsuit against the buyer’s group.
* The company has indications of interest, subject to customary terms and conditions, from 10 financial institutions for new secured warehouse funding significantly in excess of $30 billion.
The company also made the following announcements:
The company expects fourth-quarter core earnings per diluted share to be in the range of $.52 to $.57, excluding non-recurring items such as merger-related costs. The fourth quarter core earnings per share are being impacted by funding costs and increased reserves for the FFELP loan portfolio.
The company will release its private credit trust data on Friday, Dec. 14, which will show an improvement in charge-offs, 90-day and over delinquencies, and forbearances.
The company is lowering its 2008 core earnings EPS guidance from $3.25 to a range of $2.60 to $2.80 due primarily to increased costs from replacing the company’s interim funding facility.
The underlying business drivers for the company are strong and executive management is strategically repositioning certain aspects of the business to allow for maximum growth and earnings opportunities.
Equity Forward Contracts
Separately, the company has reduced the strike and trigger prices with its counterparties on equity forward contracts. As a result of these transactions, the company’s aggregate position on equity forward contracts is 48.2 million shares at an average strike price of $43.93, with trigger prices ranging from $26.00 to $19.58.
Barry Feierstein has been promoted to lead sales and marketing. Feierstein, who joined Sallie Mae in 2004, has been responsible for the company’s private loan strategy and development. Robert Autor has been appointed to lead the company’s originations, servicing and call center operations, in addition to its information technology group. Autor joined the company in 1999 as part of the Nellie Mae acquisition.
Kevin Moehn, executive vice president, sales and originations, and June McCormack, executive vice president, servicing, technology and sales marketing, will be leaving the company.
The Board will continue to work with Sallie Mae’s management to generate shareholder value, and to grow the company’s industry leadership position.
Additionally, the company will be permitting its directors and executive officers to trade company stock, subject to the company’s normal trading clearance procedures. Due to the proposed Flowers transaction, the company had restricted its directors and executives from trading company stock since March 2007.
“Core earnings” net income is a non-GAAP financial measure. The Company cannot present forward-looking information on earnings on a GAAP basis due to the inability to forecast the effect of certain items that are excluded from the Company’s core earnings presentations that could result in significant variability in reported results. Specifically, “core earnings” differs from GAAP by reporting all securitization transactions as long-term non-recourse financings, which means reporting net interest income instead of gains on sale from securitization transactions and servicing and securitization revenue, not including the periodic unrealized gains and losses that are attributable primarily to mark-to-market derivative valuations under GAAP, excluding Floor Income when it is not economically hedged, as well as excluding goodwill and intangible impairment and the amortization of acquired intangibles. Additional information on the Company’s “core earnings” net income financial measure is available in the Company’s reports on Form 10-K and Forms 10-Q.
This press release contains “forward-looking statements” including expectations as to future market share, the success of preferred channel originations and future results. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, and changes in the general interest rate environment. For more information, see the Company’s filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise these forward looking statements to conform the statement to actual results or changes in the Company’s expectations.
For mor information, contact:
Tom Joyce (703) 984-5610 (media)
Steve McGarry (703) 984-6746 (investor)
SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation’s leading provider of saving- and paying-for-college programs. The company manages $160 billion in education loans and serves nearly 10 million student and parent customers. Through its Upromise affiliates, the company also manages $19 billion in 529 college-savings plans, and 8 million members have joined Upromise to help save for college with rewards on purchases at nearly 70,000 places. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors and state and federal agencies. More information is available at www.salliemae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
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