dcsimg
   Facebook


rebuild.org finance news:

Back to Latest News Headlines

Sallie Mae Sale Now In Jeopardy

[Nov 1, 2007.]

 

It appears that the proposed sale of student lender Sallie Mae is now at risk.  The news comes in the wake of reports that the investor group objected to the terms of the sale.

Meanwhile, Sallie Mae may go to court to resolve the situation.

The student loan giant said in a written statement that it "firmly believes that the buyer group has no contractual basis to repudiate its obligations under the merger agreement and intends to pursue all remedies available to it to the fullest extent permitted by law."

At issue is a new student loan bill which would lead to a $20 billion reduction in government subsidies to companies including Sallie Mae.  The legislation would also reduce by half the interest rate on government-backed student loans.

Meanwhile, shares of Sallie Mae declined $1.24 in the aftermath of the collapse of the bailout plan.
The Flowers firm, which is part of the investor group, issued a statement saying that the investors think "that the conditions to closing under the merger agreement, if the closing were to occur today, would not be satisfied as a result of changes in the legislative and economic environment.  We have told representatives of the Sallie Mae board that we are open to discussing a revision of the transaction that reflects this new environment."

Sallie Mae has stated that the new student loan bill would cut its core earnings net income as much as 2.1% each year over a 5-year period.

Observers note that Sallie Mae appears to be eager to go to court over the collapse of the deal.  However, it's unclear how likely it is that the lending giant will win its dispute.  That's because the case appears to have no precedent, so there is no indication of how the courts would rule.

Still, Sallie Mae recorded an encouraging 3rd quarter, thanks to a large number of new loans and a $100 million drop in writeoffs for defaults on loans not backed by the government, also known as private student loans.

Julie Ann Amos
November 1st 2007

Recent News


  • Mortgage Lenders Lay Off Workers
    The mortgage industry has been hit hard by layoffs recently—the result of the nation's massive housing crisis.[29th October 2007]

  • Big Student Loan Bills Could Hurt the Economy
    Over the past 10 years, the cost of a college education has nearly doubled. As a result, students have been forced to turn to loans to finance their classes in a move which could spell trouble for the American economy. [29th October 2007]

  • House Approves Aid for Homeowners
    The U.S. House last week approved a program designed to help homeowners to avoid losing their homes as a result of delinquencies on their loan payments. [26th October 2007]

  • Orders for Durable Goods Take a Tumble
    Orders for durable goods slid in August—the largest drop in 7 months. The downturn indicates that the country's industrial sector is facing hard times. [26th October 2007]

 

news subscription:

Easily subscribe to the rebuild.org news feed.

Read our news without even visiting our site!

Feedburner
Subscribe to our news

 

news archive:

Rebuild.org monthly news archive