Sallie Mae 2006 Annual Report Download - page 90

settlement in the College Loan Corporation (“CLC”) lawsuit and to lower corporate information technology
expenses.
At December 31, 2006, 2005 and 2004, the Corporate and Other operating segment had total assets of
$999 million, $719 million and $524 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Except in the case of acquisitions, which are discussed separately, our DMO and Corporate and Other
business segments are not capital intensive businesses and as such a minimal amount of debt and equity capital
is allocated to these segments. Therefore, the following “LIQUIDITY AND CAPITAL RESOURCES”
discussion is concentrated on our Lending business segment.
We have developed deep and diverse funding sources to ensure continued access to funding to support
our business plan. Our biggest funding challenge continues to be our ability to maintain cost-effective liquidity
to fund the growth in the Managed portfolio of student loans as well as to refinance previously securitized
loans when borrowers choose to refinance their loans through a FFELP Consolidation Loan or a Private
Education Consolidation Loan with us. At the same time, we maintain earnings spreads by controlling interest
rate risk. Our main source of funding is student loan securitizations and we have built a highly liquid and deep
market for such financings as evidenced by the $32.1 billion in student loans securitized in thirteen
transactions in 2006, and $26.1 billion in twelve transactions in 2005. We are the largest issuer in the student
loan asset-backed sector. FFELP securitizations are unique securities in the asset-backed market as they are
backed by student loans with an explicit U.S. government guarantee on 99 percent of principal and interest
(prior to July 1, the guarantee was 100 percent). The investor base for our student loan-backed securities is
worldwide and we believe that the market for these securities will be available to meet our long-term funding
needs for the foreseeable future. Securitizations comprised 69 percent of our Managed debt outstanding at
December 31, 2006, unchanged from December 31, 2005.
In addition to securitizations, we also continued to diversify our sources of funding and issued
$11.7 billion in SLM Corporation long-term, unsecured debt in 2006. Over the years we have strategically
introduced several SLM Corporation long-term debt structures that further diversified our funding sources and
substantially increased our fixed income investor base. In total, at December 31, 2006, on-balance sheet debt,
exclusive of on-balance sheet securitizations and secured indentured trusts, totaled $48.9 billion versus
$41.7 billion at December 31, 2005.
Liquidity at SLM Corporation is important to enable us to effectively fund our student loan acquisitions,
to meet maturing debt obligations, and to fund operations. The following table details our sources of liquidity
and the available capacity at December 31, 2006 and 2005.
Available Capacity Available Capacity
December 31, 2006 December 31, 2005
Sources of primary liquidity:
Unrestricted cash and liquid investments ............... $ 4,720 $ 3,928
Unused commercial paper and bank lines of credit ........ 6,500 5,500
ABCP borrowing capacity . . . ....................... 1,047 41
Total sources of primary liquidity ...................... 12,267 9,469
Sources of stand-by liquidity:
Unencumbered FFELP student loans .................. 28,070 24,530
Total sources of primary and stand-by liquidity ............ $40,337 $33,999
We believe our unencumbered FFELP student loan portfolio provides an additional source of potential or
stand-by liquidity because the maturation of government guaranteed student loan securitizations has created a
wide and deep marketplace for such transactions. In addition to the securitization markets, we believe that the
wholesale market for FFELP student loans provides an additional potential source of stand-by liquidity. At
89