Sallie Mae Gets $31 Billion Financing Deal

After being left at the altar, Sallie Mae has decided to let bygones by bygones, in exchange for a little credit help. This, from the Associated Press:

Sallie Mae on Monday said it agreed to drop its lawsuit against a group of investors that backed out of buying the student lender and received a commitment from seven banks to refinance $31 billion worth of its debt.

In dismissing the suit, Reston, Va.-based Sallie will part with an effort to obtain a $900 million breakup fee from the investment group led by private-equity firm J.C. Flowers & Co.

JP Morgan Chase and Bank of America, which were part of the investment group, are among the seven banks that put together the new financing for Sallie, formally SLM Corp.

The investment group in October dropped its proposed acquisition of the student lender for $25 billion, or $60 per share, claiming a new law cut billions of dollars in federal subsidies for student lenders such as Sallie and would adversely affect its earnings potential.

J.C. Flowers tried to renegotiate a cheaper deal, but Sallie, the nation's largest student lender, sued the group to make it live up to the terms of the original offer, which included the breakup fee.

The new 364-day financing deal replaces an interim financing arrangement put in place by Bank of America and JPMorgan Chase as part of the proposed acquisition.

The other banks involved in the new financing plan include, Barclays Capital, Deutsche Bank, Credit Suisse, The Royal Bank of Scotland and UBS.

Last week Sallie said it lost $1.6 billion in the fourth quarter as borrowing costs rose and it set aside $575 million to cover bad loans.

Shares of Sallie rose 62 cents, or more than 2 percent, to $20.50 in early trading Monday.

By Dan Beyers  |  January 28, 2008; 11:56 AM ET
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