Sallie Mae 2008 Annual Report Download - page 169
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7. Borrowings (Continued)
clean-up call levels but the call was not exercised by the Company. Under SFAS No. 140, because the
Company can now exercise that option at their discretion going forward, the Company effectively controls the
assets of the trusts as the trusts are not considered QSPEs. This resulted in the Company consolidating at fair
value $289 million in assets and $278 million in liabilities related to these trusts.
The Company has secured assets and outstanding bonds in indentured trusts resulting from the acquisition
of various student loan providers in prior periods. The indentures were created and bonds issued to finance the
acquisition of student loans guaranteed under the Higher Education Act. The bonds are limited obligations of
the Company and are secured by and payable from payments associated with the underlying secured loans.
The Company had $1.0 billion of taxable and $1.4 billion of tax-exempt auction rate securities
outstanding in on-balance sheet securitizations and indentured trusts, respectively, at December 31, 2008. In
February 2008, an imbalance of supply and demand in the auction rate securities market as a whole led to
failures of the auctions pursuant to which certain of the Company’s auction rate securities’ interest rates are
set. As a result, certain of the Company’s auction rate securities bear interest at the maximum rate allowable
under their terms. The maximum allowable interest rate on the Company’s $1.0 billion taxable auction rate
securities is generally LIBOR plus 1.50 percent. The maximum allowable interest rate on many of the
Company’s $1.4 billion of tax-exempt auction rate securities was amended to LIBOR plus 2.00 percent
through May 31, 2008. After May 31, 2008, the maximum allowable rate on these securities reverted to a
formula driven rate, which produced various maximum rates up to 14 percent during 2008 but averaged
1.60 percent at December 31, 2008.
F-49
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)