Sallie Mae 2006 Annual Report Download - page 92

The table below presents our unsecured on-balance sheet funding by funding source for the years ended
December 31, 2006 and 2005.
2006 2005 2006 2005
Debt Issued
for the Years
Ended December 31,
Outstanding at
December 31,
Convertible debentures ......................... $ — $ — $ 1,997 $ 1,992
Retail notes ................................. 535 790 4,137 3,618
Foreign currency denominated notes
(1)
............. 3,862 3,997 12,635 8,782
Extendible notes.............................. 1,499 998 5,746 5,246
Global notes (Institutional) ...................... 5,843 4,465 22,375 20,287
Medium-term notes (Institutional) ................. — — 1,797 1,802
Other ...................................... — — 249 4
Total ...................................... $11,739 $10,250 $48,936 $41,731
(1)
All foreign currency denominated notes are hedged using derivatives that exchange the foreign denomination for U.S. dollars.
In addition to the term issuances reflected in the table above, we also use our commercial paper program
for short-term liquidity purposes. The average balance of commercial paper outstanding during the years ended
December 31, 2006 and 2005 was $82 million and $345 million, respectively. The maximum daily amount
outstanding for the years ended December 31, 2006 and 2005 was $2.2 billion and $2.8 billion, respectively.
Preferred Stock Issuance
At December 31, 2006, we had 3.3 million shares of 6.97 percent Cumulative Redeemable Preferred
Stock, Series A (the “Series A Preferred Stock”) and 4.0 million shares of Floating-Rate Non-Cumulative
Preferred Stock, Series B (the “Series B Preferred Stock”) outstanding. Neither series has a maturity date but
can be redeemed at the Company’s option beginning November 16, 2009 for Series A, and on any dividend
payment date on or after June 15, 2010 for Series B. Redemption would include any accrued and unpaid
dividends up to the redemption date. The shares have no preemptive or conversion rights and are not
convertible into or exchangeable for any of the Company’s other securities or property. Dividends on both
series are not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors.
Upon liquidation or dissolution of the Company, holders of our Series A and Series B Preferred Stock are
entitled to receive $50 and $100 per share, respectively, plus an amount equal to accrued and unpaid dividends
for the then current quarterly dividend period, if any, pro rata, and before any distribution of assets are made
to holders of our common stock.
Contingently Convertible Debentures
We had approximately $2 billion Contingently Convertible Debentures (“Co-Cos”) outstanding at
December 31, 2006. The Co-Cos are convertible, under certain conditions, into shares of SLM common stock
at an initial conversion price of $65.98. The investors generally can only convert the debentures if the
Company’s common stock has appreciated for a prescribed period to 130 percent of the conversion price,
which would amount to $85.77. The convertible debentures bear interest at a floating rate equal to three-month
LIBOR minus .05 percent, until July 25, 2007, after which, the debentures can pay additional contingent
interest under certain circumstances. Beginning on July 25, 2007, we may call the debentures and the investors
may put the debentures, subject to certain conditions.
In calculating diluted earnings per share (“diluted EPS”) we follow the guidance of EITF Issue No. 04-8,
“The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” which requires the shares
underlying the Co-Cos to be included in diluted EPS computations regardless of whether the market price
trigger or the conversion price has been met, using the “if-converted” accounting method, while the after-tax
interest expense of the Co-Cos is added back to earnings. Diluted EPS amounts disclosed prior to December
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