Sallie Mae 2007 Annual Report Download - page 95

and $5.9 billion of Private Education Loan ABCP conduit facilities on February 29, 2008, or as soon as
practical thereafter. Also on that date, we anticipate closing on an additional $2.0 billion secured FFELP loan
facility. In addition, we anticipate closing on an additional $2.5 billion of student loan ABCP conduit facilities
by mid March 2008. The new $33.8 billion of financing facilities we expect to close on, which may ultimately
be increased to up to $35 billion in aggregate, will replace our $30 billion Interim ABCP Facility and
$6 billion ABCP facility. The initial term of each of the new facilities will be 364 days. These new facilities
will provide funding for certain of our FFELP loans and Private Education Loans until such time as these
loans are refinanced in the term ABS markets. As part of this new financing arrangement, the lawsuit filed by
the Company related to the Merger, as well as all counterclaims, was dismissed and the Merger Agreement
was terminated on January 25, 2008.
On February 14, 2008, we reached agreement with Bank of America and JPMorgan Chase to extend the
date upon which outstanding advances under the $30.0 billion Interim ABCP Facility step up to a penalty rate.
Under our agreement with Bank of America and JPMorgan Chase, the step-up date was extended from
February 15, 2008 to a date that is the later to occur of (i) March 1, 2008 or (ii) if the Company’s new ABCP
facilities, also being arranged by Bank of America and JPMorgan Chase, is closed prior to March 1, 2008, the
date that is the earlier of (x) 15 Business Days after the date the initial advance is made under those new
facilities and (y) 15 Business Days prior to April 24, 2008. In the event amounts outstanding under the Interim
ABCP Facility are not repaid by the Company in full, the Interim ABCP Facility will terminate on April 24,
2008.
During 2007, we also funded our liquidity needs through our existing $6.0 billion ABCP facility, our cash
and investment portfolio and by selectively selling FFELP student loans in the secondary market. In addition,
to supplement our funding sources, we maintain $6.5 billion in unsecured revolving credit facilities. We have
not in the past relied upon, and do not expect to rely on, our unsecured revolving credit facilities as a primary
source of liquidity. Although we have never borrowed under these facilities, they are available to be drawn
upon for general corporate purposes.
Our ability to access our unsecured revolving credit facilities will depend upon our ability to meet
financial covenants set forth in the credit agreements, including a covenant to maintain consolidated tangible
net worth of at least $1.38 billion, compliance with which will be affected by a variety of factors, including
mark-to-market accounting adjustments applied principally to our derivatives and our residual interests in off-
balance sheet securitized loans. If we fail to comply with the consolidated tangible net worth covenant (or any
other covenants) in our revolving credit facilities at that date or in the future, the banks party to the facilities
(which include Bank of America and JPMorgan Chase, as lenders and agents under the facilities) may elect to
terminate their commitments, and if they did elect to terminate the facilities, our available liquidity could be
materially impaired. Our tangible net worth for covenant purposes at December 31, 2007 was $3.5 billion.
Beginning on November 29, 2007, the Company amended or closed out certain equity forward contracts.
On December 19, 2007, the Company entered into a series of transactions with its equity forward
counterparties and Citibank, N.A. (“Citibank”) to assign all of its remaining equity forward contracts, covering
44,039,890 shares, to Citibank. In connection with the assignment of the equity forward contracts, the
Company and Citibank amended the terms of the equity forward contract to eliminate all stock price triggers
(which had previously allowed the counterparty to terminate the contracts prior to their scheduled maturity
date) and termination events based on the Company’s credit ratings. The strike price of the equity forward
contract on December 19, 2007, was $45.25 with a maturity date of February 22, 2008. The new Citibank
equity forward contract was 100 percent collateralized with cash.
On December 31, 2007, we closed public offerings of our common stock and 7.25 percent mandatory
convertible preferred stock, Series C, resulting in total net proceeds of approximately $2.9 billion. We sold
101,781,170 shares of our common stock at a price of $19.65 per share and 1,000,000 shares of our
7.25 percent mandatory convertible preferred stock, Series C. Each share of mandatory convertible preferred
stock, Series C, has a $1,000 liquidation preference and is subject to mandatory conversion on December 15,
2010, into between 41.7188 and 50.8906 shares of the company’s common stock, unless previously converted
94