Thursday, May 14, 2009

Sallie Mae Strongly Disagrees with Moody’s Ratings Action

(BUSINESS WIRE)--SLM Corporation (NYSE:SLM), commonly known as Sallie Mae, today issued a statement in response to a Moody’s downgrade of SLM Corporation’s long-term and short-term unsecured debt.

“This action is both unfortunate and surprising in light of the numerous recent positive developments in the financial strength of the company,” stated Albert L. Lord, CEO. Mr. Lord continued, “Moody’s conclusion rests mostly on its predictions of the political process surrounding the Federal Student Loan program. This seems to us inappropriately speculative and very premature since any changes made to America’s student loan programs must be legislated by Congress – a several months process not yet started.”

Mr. Lord cited market developments since Moody’s placed the company “under review for possible downgrade” in February. Sallie Mae’s liquidity position has materially strengthened as the company secured liquidity in a variety of transactions, totaling over $11 billion in new sources this quarter alone. Specifically, in April, the company completed three FFELP asset-backed securitization (ABS) transactions totaling approximately $5.1 billion. In May, the company completed a $2.6 billion private education loan (ABS) transaction. In addition, the organization extended $22 billion of its asset-backed commercial paper (ABCP) facility for one year, paid in full a $2.7 billion private credit (ABCP) facility, and this week announced its initial placement through the U.S. Department of Education-sponsored “Straight A Funding” conduit.

Jack Remondi, CFO of Sallie Mae, stated that Moody’s actions are directionally at odds with the recent market performance in the company’s debt securities. “Investors see what we see, a substantial strengthening of our liquidity position and several new sources of term, lower cost funding. Moody’s action, in light of these recent developments, is perplexing.”

Mr. Remondi continued, “It is difficult to understand how an enterprise with 80 percent of its assets guaranteed by the U.S. Government, over 70 percent of its assets funded to term and the strength of our franchise merits less than an investment-grade rating.”

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