SLM Corp. or Sallie Mae closed a $1.5 billion, 12.5-year ABS-based total return swap facility with Goldman Sachs International. The facility will give the student loan firm added financing for private education loans.
We are pleased that, despite the ongoing challenging markets, Sallie Mae continues to access funding to provide students and families with the financing they need to pay for college, Jack Remondi, Sallie Mae vice chairman and chief financial officer, said in a release. This facility will provide us with a new, long-term financing alternative for our private student loans.
Meanwhile, according to published reports, JPMorgan Securities analyst Andrew Wessel expects low commercial paper rates to pressure the Sallie Mae's earnings in the first half of this year.
Around 70% of the student loan lender's assets are indexed to 90-day commercial paper rates, Wessel said. These rates are probably going to stay artificially low in 1H09, Wessel said, as a result of the government's commercial paper program.
The pending announcement of plans for a government-backed conduit could give Sallie Mae a boost, Wessel said. However, this would depend on the terms and conditions of such a facility. Sallie Mae said it could finance up to $16 billion of loans through such financing, Wessel said.