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Sallie Drops Lawsuit Over Disputed Fee For Breakup
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Sallie Mae said yesterday that Bank of America and J.P. Morgan were among the leaders of the bank consortium that arranged the new $31 billion credit line. The dismissal of Sallie Mae's lawsuit was a condition of the refinancing, Flowers said in a news release.
The interest rate on the new credit line was not disclosed.
"One could argue that Sallie Mae gave up the potential $900 million termination fee just to get the funding, making the true cost of the debt astronomically high," analysts at the Arlington investment firm Friedman, Billings Ramsey said yesterday in a report to clients.
The FBR analysts said Sallie Mae "did the right thing" in accepting that trade-off because the company had little chance of winning the $900 million termination fee in court.
Sallie Mae spokesman Tom Joyce, noting the "turbulent and uncertain time," said in a statement that "a consortium of some of the world's leading financial institutions have given us a vote of confidence in our business plan and our management team. Putting the lawsuit behind us allows us to return 100 percent of our focus to doing what we do best -- serving schools and students."
Staff researcher Richard Drezen contributed to this report.
