California Firm Discloses Investment in Sallie Mae
Sallie Mae, based in Reston, gained help from a law letting the Education Department buy student loans from lenders.
(By Carol T. Powers -- Bloomberg News)
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Saturday, May 10, 2008
A San Francisco money management firm disclosed yesterday that it had acquired a 10.5 percent stake in Sallie Mae, the nation's largest student-loan company.
Dodge & Cox, which manages mutual funds and other accounts, holds 48.9 million shares, making it the Reston firm's largest stockholder, according to data compiled by the Bloomberg information service.
Sallie Mae's share price has been battered by cuts in federal student-loan subsidies, an upheaval in the credit markets and the collapse last year of a planned leveraged buyout of the company at $60 per share.
The Dodge & Cox announcement comes as Sallie Mae won a measure of relief this week when President Bush signed legislation allowing the Education Department to buy student loans from lenders. However, it remains unclear whether the government will buy the loans on terms that will be profitable for the lenders, said Matthew J. Snowling, an analyst at the Arlington investment firm Friedman, Billings, Ramsey Group.
The legislative relief will expire next year, so "if things don't get better come July 2009, we'll be facing the same problem all over again," Snowling said. "I think that's one issue that would have to be resolved before Sallie Mae really becomes an acquisition target again."
Investors' loss of enthusiasm for various forms of debt has made it more costly and difficult for lenders such as Sallie Mae to sell student loans, which in turn affects their ability to issue loans.
Dodge & Cox said in a filing with the Securities and Exchange Commission that it holds its Sallie Mae shares on behalf of clients, which may include such institutional investors as employee-benefit plans, pension funds and endowments.
The type of disclosure Dodge & Cox made with the SEC indicated that the firm was acting as a passive investor rather than pursuing a takeover of Sallie Mae.
Dodge & Cox personnel did not return phone calls yesterday. A Sallie Mae spokeswoman referred questions to Dodge & Cox.
Sallie Mae's stock price fell 58 cents yesterday, to $21.70.
