Sallie Mae 2008 Annual Report Download - page 183

10. Other Assets (Continued)
The “derivatives at fair value” line in the above table represents the fair value of the Company’s
derivatives in a gain position by counterparty exclusive of accrued interest. At December 31, 2008 and 2007,
these balances primarily included cross-currency interest rate swaps and interest rate swaps designated as fair
value hedges that were offset by an increase in interest-bearing liabilities related to the hedged debt. As of
December 31, 2008 and 2007, the cumulative mark-to-market adjustment to the hedged debt was $(3.4) billion
and $(3.6) billion, respectively.
11. Stockholders’ Equity
Preferred Stock
At December 31, 2008, 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 Preferred
Stock, and on any dividend payment date on or after June 15, 2010 for Series B Preferred Stock. 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, 2008, the Company had outstanding 1.1 million shares of 7.25 percent Mandatory
Convertible Preferred Stock, Series C (the “Series C Preferred Stock”). The Series C Preferred Stock was
issued on December 31, 2007, and resulted in net proceeds of approximately $1.0 billion. An additional
150,000 shares were issued on January 9, 2008, as a result of the underwriters exercising their over-allotment
option, and resulted in net proceeds of $145.5 million. 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 Preferred Stock 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.
F-63
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)