Sallie Chairman Exercises Stock Options

Staff writer David Hilzenrath reports that Albert L. Lord last week exercised 1.7 million stock options that were due to expire yesterday, at exercise prices of $18.33 to $26.62 per share.

Lord used about 1.1 million of the options to pay taxes or exercise costs related to the trades, according to a regulatory filing. He kept the remaining shares.

The value of Lord's stake in the Reston student loan company is riding on a pending buyout by private investors at $60 per share. At that price, his options and stock awards would be worth $224.9 million on completion of the deal, SLM Corp., as the company is formally known, reported last month.

However, the stock market seems to doubt that the deal will go through as planned: Sallie Mae's shares fell $1.30 yesterday to close at $46.90, closer to $40.75, the price before news of the deal was reported. The buyers have stated that proposed changes in federal student loan programs could be grounds for calling off the deal. Sallie Mae has rejected that view.

The recent drying up of easy money for debt-fueled buyouts could make pending deals such as Sallie Mae's costlier and more complicated to complete, some analysts say. Higher borrowing costs could give the investment banks in the Sallie Mae buyout group an incentive to try to renegotiate terms or back out, analysts say.

Sallie Mae issued a statement Aug. 3 saying that several members of its board would be exercising options that were scheduled to expire yesterday. The board members will not sell any shares acquired from exercising the options, the company said.

Also exercising expiring options last week or yesterday were directors Steven L. Shapiro and A. Alexander Porter Jr., according to regulatory filings.

By Dan Beyers  |  August 14, 2007; 6:43 AM ET  | Category:  Sallie Mae
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There is something obscene about Albert Lord taking $225 million dollars out of the Sallie Mae--and away from students and families struggling to afford college--at a time when the industry itself is mired in scandal and crisis.

Congress rightfully has questioned the industry and wondered that if there is so much extra cash to pay CEOs, then they shouldn't need such a big subsidy for student loans. Students, SEIU, and others plan to attend the shareholders meeting tomorrow, and hope to ask the same question of Sallie Mae executives. Today, they are hoping to meet with execs in advance of the meeting and urge them to examine how the buyout can be structured to safeguard the interest of students. Among the proposed remedies: no longer charging minority students higher interest rates based on their college choice or ZIP code, pledging to keep student loan rates reasonable, providing additional money for debt forgiveness, providing clear and transparent information to student lenders, and foregoing aggressive debt collection practices.

On top of the nearly $370 million in payouts that the top Sallie Mae officers are expected to make on the deal, banks, lawyers, and financial advisers to this deal will make $169 million in fees.

For some context, note that the fees this deal will cost alone could pay for:
• Up to 405,000 Pell Grants;
• Up to 46,285 Stafford Loans;
• 216,000 first-year or 124,615 second-year Academic Competitiveness Grants;
• 40,500 SMART Grants;
• Between 40,500 to 1,620,000 Federal Supplemental Educational Opportunity Grants; or
• Federal Teacher Loan Forgiveness grants for 32,400 elementary and secondary school teachers.

Meanwhile, Sallie Mae gives back just 1 percent of its earnings to students through the company's charitable fund.

Posted by: SEIU.Deal Team | August 14, 2007 10:12 AM

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