S&P keeps Sallie Mae on watch

Standard & Poor's said SLM Corp. (Sallie Mae) remains on CreditWatch with negative implications following the company's recent disclosure that the buyout group led by J.C. Flowers, Bank of America and JPMorgan Chase had decided not to proceed with its acquisition of the company at this time.

In an earlier release, the agency said it believed the BBB+ counterparty credit rating of Sallie Mae would accurately reflect the company's standalone creditworthiness in the event the transaction did not occur. S&P said it still believes that replacing funding facilities related to the merger will be challenging, especially in light of current market conditions.

However, the agency also expects Sallie Mae to maintain its strong position within the student loan industry as it benefits from economies of scale, even though core earnings will be under pressure from higher funding costs and increased reserves for the FFELP loan portfolio.

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