Sallie Mae or SLM Corp. issued a statement in response to a Moodys Investors Service downgrade of its long-term and short-term unsecured debt.
This action is both unfortunate and surprising in light of the numerous recent positive developments in the financial strength of the company, said Albert Lord, CEO of SLM Corp. Moodys conclusion rests mostly on its predictions of the political process surrounding the Federal student loan program. This seems to us inappropriately speculative and very premature since any changes made to Americas student loan programs must be legislated by Congress a several months process not yet started.
Since Moodys placed Sallie Mae under review for possible downgrade in February, its liquidity position has materially strengthened as the company secured liquidity in a variety of transactions, totaling over $11 billion in new sources this quarter alone. In April, the company completed three FFELP securitization deals totaling approximately $5.1 billion.
In May, the company completed a $2.6 billion private education securitization transaction. In addition, the organization extended $22 billion of its asset-backed commercial paper (ABCP) facility for one year, paid in full a $2.7 billion private credit ABCP facility, and this week announced its initial placement through the U.S. Department of Education-sponsored Straight A Funding conduit.
Jack Remondi, CFO of the student loan firm, stated that Moodys actions are directionally at odds with the recent market performance in the companys debt securities. Investors see what we see, a substantial strengthening of our liquidity position and several new sources of term, lower cost funding," he said. "Moodys action, in light of these recent developments, is perplexing.
It is difficult to understand how an enterprise with 80% of its assets guaranteed by the U.S. Government, over 70% of its assets funded to term and the strength of our franchise merits less than an investment-grade rating, Remondi said.