Sallie Mae 2008 Annual Report Download - page 91

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
Financing Facilities are subject to termination under certain circumstances, including the Company’s failure to
comply with the principal financial covenants in its unsecured revolving credit facilities.
On February 2, 2009, the Company extended the maturity date of the 2008 ABCP Facilities from
February 28, 2009 to April 28, 2009 for a $61 million upfront fee. The other terms of the facilities remain
materially unchanged. The Company expects to refinance the 2008 ABCP Facilities at a lower aggregate
commitment than the $25.6 billion committed as of December 31, 2008. If the Company does not pay off all
outstanding amounts of the 2008 ABCP Facilities at maturity, the facilities will extend by 90 days with the
interest rate increasing each month during the 90-day period. The total increase in interest rates during this
period is 1.5 percent to 2.0 percent depending on the facility. On February 27, 2009, the Company extended
the maturity date of the 2008 Asset-Backed Loan Facility from February 28, 2009 to April 28, 2009 for a
$4 million upfront fee. The other terms of this facility remain materially unchanged.
Borrowings under the 2008 Asset-Backed Financing Facilities are nonrecourse to the Company. As of
December 31, 2008, the Company had $24.8 billion outstanding in connection with the 2008 Asset Backed
Financing Facilities. The book basis of the assets securing these facilities as of December 31, 2008 was
$33.2 billion.
On January 6, 2009 we closed a $1.5 billion, 12.5 year asset-backed securities based facility. This facility
will be used to provide up to $1.5 billion term financing for Private Education Loans. The fully utilized cost
of financing obtained under this facility is expected to be LIBOR plus 5.75 percent.
Secured borrowings, including securitizations, asset-backed commercial paper (“ABCP”) borrowings and
indentured trusts, comprised 78 percent of our Managed debt outstanding at December 31, 2008 versus
75 percent at December 31, 2007.
On February 6, 2009, the Federal Reserve Bank of New York published proposed terms for a program
designed to facilitate renewed issuance of consumer and small business asset-backed securities (‘‘ABS”) at
lower interest rate spreads. As proposed, the U.S. Government’s Term Asset-Backed Securities Loan Facility
(“TALF”) will provide investors with funding of up to three years for eligible ABS rated by two or more
rating agencies in the highest investment-grade rating category. Eligible ABS include ‘AAA’ rated student loan
ABS backed by FFELP and private student loans first disbursed since May 1, 2007. As of December 31, 2008,
we had approximately $14 billion of student loans eligible to serve as collateral for ABS funded under TALF;
this amount does not include loans eligible for ECASLA financing programs. The Federal Reserve Bank
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