Sallie Mae 2007 Annual Report Download - page 175

years ended December 31, 2007 and 2006, a net ineffectiveness gain (loss) of $70 million and ($23) million,
respectively, was recorded in the “Gains (losses) on derivatives and hedging activities, net” line in the
consolidated statement of income related to the cross-currency interest rate swap hedge relationships.
12. Stockholders’ Equity
Preferred Stock
At December 31, 2007, the Company had outstanding 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”). 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. Holders
of Series A Preferred Stock are entitled to receive cumulative, quarterly cash dividends at the annual rate of
$3.485 per share. Holders of Series B Preferred Stock are entitled to receive quarterly dividends, based on
3-month LIBOR plus 70 basis points per annum in arrears, on and until June 15, 2011, increasing to 3-month
LIBOR plus 170 basis points per annum in arrears, after and including the period beginning on June 15, 2011.
Upon liquidation or dissolution of the Company, holders of the 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 the Company’s common stock.
On December 31, 2007, the Company issued 1.0 million shares of 7.25 percent Mandatory Convertible
Preferred Stock, Series C (the “Series C Preferred Stock”). Net proceeds from the sale, after deducting
underwriting fees and other fees and expenses of the offering, were approximately $1.0 billion. Each share of
Series C Preferred Stock has a $1,000 liquidation preference and is subject to mandatory conversion on
December 15, 2010. On the mandatory conversion date, each share of the Series C Preferred Stock will
automatically convert into shares of the Company’s common stock based on a conversion rate calculated using
the average of the closing prices per share of the Company’s common stock during the 20 consecutive trading
day period ending on the third trading day immediately preceding the mandatory conversion date. If the
applicable market value on the mandatory conversion date is (i) greater than $23.97, the conversion rate is
41.7188 shares of the Company’s common stock per share of Series C Preferred Stock, (ii) less than $19.65,
the conversion rate is 50.8906 shares of the Company’s common stock per share of Series C Preferred Stock,
or (iii) equal to or less than $23.97 but greater than or equal to $19.65, the conversion rate is $1,000 divided
by the applicable market value, which is between 41.7188 shares and 50.8906 shares of the Company’s
common stock per share of Series C Preferred Stock. At any time prior to December 15, 2010, the holder may
elect optional conversion in whole or in part at the minimum conversion rate of 41.7188 shares of the
Company’s common stock per share of Series C Preferred Stock. Series C is not redeemable. Dividends are
not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors. Holders of Series C
Preferred Stock are entitled to receive cumulative, quarterly cash dividends at the annual rate of 7.25 percent
per share. On January 9, 2008, the Company issued an additional 150,000 shares of Series C Preferred Stock
as a result of the underwriters exercising their over-allotment option, which resulted in net proceeds of
$145.5 million.
F-54
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)