Sallie Mae 2008 Annual Report Download - page 167

7. Borrowings (Continued)
is the primary beneficiary of and currently consolidates the following financing VIEs as of December 31,
2008:
Secured Borrowings:
Short
Term
Long
Term Total Loans Cash Other Assets Total
(Dollars in millions) Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding
December 31, 2008
ED Participation Program ......... $ 7,365 $ — $ 7,365 $ 7,733 $ 88 $ 85 $ 7,906
2008 Asset-Backed Financing
Facilities ................... 24,768 — 24,768 31,953 462 816 33,231
On-balance sheet securitizations ..... — 80,601 80,601 81,547 2,632 999 85,178
Indentured trusts ............... 31 1,972 2,003 2,199 236 40 2,475
32,164 82,573 114,737 123,432 3,418 1,940 128,790
SFAS No. 133 fair value adjustment . . — 872 872 — — — —
Total . . . .................... $32,164 $83,445 $115,609 $123,432 $3,418 $1,940 $128,790
Under ECASLA, ED implemented the Loan Participation Program (“Participation Program”) and Loan
Purchase Commitment Program (“Purchase Program”). Under the terms of the Participation Program, ED
provides short-term liquidity to FFELP lenders by purchasing participation interests in pools of eligible FFELP
loans. Loans funded under the Participation Program are charged at a rate of commercial paper plus .50% on
the principal amount of the participation interests outstanding. The initial advance under the program was
made in August 2008. The Participation Program matures on September 30, 2009, at which time the Company
can either refinance the loans or sell them to ED under the Purchase Program.
During the first quarter of 2008, the Company entered into three new asset-backed financing facilities
(the “2008 Asset-Backed Financing Facilities”): (i) a $26.0 billion FFELP student loan ABCP conduit facility;
(ii) a $5.9 billion Private Education Loan ABCP conduit facility (collectively, the “2008 ABCP Facilities”);
and (iii) a $2.0 billion secured FFELP loan facility (the “2008 Asset-Backed Loan Facility”). The initial term
of the 2008 Asset-Backed Financing Facilities is 364 days. The underlying cost of borrowing under the 2008
ABCP Facilities is approximately LIBOR plus 0.68 percent for the FFELP loan facilities and LIBOR plus
1.55 percent for the Private Education Loan facility, excluding up-front and unused commitment fees. All-in
pricing on the 2008 ABCP Facilities varies based on usage. For the full year 2008, the combined, all-in cost
of borrowings related to the 2008 Asset-Backed Financing Facilities, including amortized up-front fees and
unused commitment fees, was three-month LIBOR plus 2.47 percent. The primary use of the 2008 Asset-
Backed Financing Facilities was to refinance comparable asset-backed commercial paper facilities incurred in
connection with the Proposed Merger, with the expectation that outstanding balances under the 2008 Asset-
Backed Financing Facilities would be reduced through securitization of the underlying student loan collateral
in the term ABS market. Funding under the 2008 Asset-Backed Financing Facilities is subject to usual and
customary conditions.
In the third quarter of 2008, the Company reduced the commitments under its Private Education Loan
ABCP conduit facility by approximately $2.2 billion to $3.7 billion and the commitments under its FFELP
ABCP Facilities by $4.1 billion to $21.9 billion. There were no changes to interest rates, maturity or other
terms of the facilities made in connection with the reductions. The Company reduced these commitments after
an analysis of its ongoing liquidity needs and following its acceptance and funding under ED’s Participation
and Purchase Programs.
The maximum amount the Company may borrow under the 2008 ABCP Facilities is limited based on
certain factors, including market conditions and the fair value of student loans in the facility. As of
December 31, 2008, the maximum borrowing amount was approximately $20.9 billion under the FFELP
ABCP Facilities and $3.0 billion under the Private Education Loan ABCP Facility. The 2008 Asset-Backed
F-47
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)