Sallie Mae to focus on growing capital, diversifying funding following failed transaction

By Jennifer Lanning Drey

Portland, Ore., Dec. 19 - SLM Corp. (Sallie Mae) will shift its focus toward adding capital and diversifying the company's funding base following its failed buyout deal, Albert Lord, Sallie Mae's chief executive officer as of Dec. 14, said Wednesday during a shareholder conference.

"This is a very challenging time. The goal here is to get out of deal mode and into the growth mode - the same growth mode we've been in for the past 25 years," Lord said.

Sallie Mae recently lowered its outlook for fourth-quarter earnings, which Lord said Wednesday was the result of higher funding costs.

The CEO said he hopes to improve the balance sheet so that the company can earn back the single-A rating it lost due to the unfinished deal.

When later asked during the question-and-answer session whether Sallie Mae will sell equity to strengthen the balance sheet, Lord said, "At this point I'm not going to get very precise with you. The idea is to strengthen the equity, the capital count, with financing somewhere beneath the long-term credit line."

Lord also said during the question-and-answer session that the company would review its dividend in the second half of 2008.

Lord said his near-term goals also include signing a truce with the unsecured lending community and disarming equity-forward contracts.

In addition, he said Sallie Mae would look to build its off-balance sheet capacity by finding avenues to offload its assets other than through securitizations.

Lord said he hopes to begin to restore a viable long-term earnings growth rate to the company by the summer of 2008.

Sallie Mae provides saving- and paying-for-college programs and is based in Reston, Va.

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