Sallie Mae terminates merger agreement, secures new financing

By Lisa Kerner

Charlotte, N.C., Jan. 28 - SLM Corp. (Sallie Mae) received commitments for $31 billion of 364-day financing from a consortium of banks led by Bank of America, JPMorgan Chase, Barclays Capital, Deutsche Bank, Credit Suisse and the Royal Bank of Scotland, as well as from UBS.

The financing replaces the $30 billion interim financing put in place by Bank of America and JPMorgan Chase as part of their proposed merger transaction with Sallie Mae, a company news release stated.

An investor group led by J.C. Flowers, Bank of America and JPMorgan Chase had sought to take Sallie Mae private for some $25 billion.

The April 15, 2007 merger agreement giving Sallie Mae shareholders $60 cash per share has been terminated.

Shareholders had approved the transaction in August.

However, on Oct. 15, it was reported that the investor group offered to terminate its merger agreement with Sallie Mae under the belief that Sallie Mae had suffered a "material adverse effect" as defined under the agreement.

As part of the new financing arrangement, the lawsuit filed by Sallie Mae in the Delaware Chancery Court will be dismissed. The company was seeking a declaration that the buyer group had repudiated its merger agreement.

The merger had been set to close Nov. 5.

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

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