Sallie Mae 2009 Annual Report Download - page 96

Asset-Backed Financing Facilities
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 loan ABCP conduit facility (the
“2008 FFELP ABCP Facility”); (ii) a $5.9 billion Private Education Loan ABCP conduit facility (the “2008
Private Education Loan ABCP 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 was 364 days. The underlying cost of borrowing under the 2008 ABCP Facilities
was approximately LIBOR plus 0.68 percent for the FFELP loan facilities and LIBOR plus 1.55 percent for
the Private Education Loan facility, excluding upfront and unused commitment fees. All-in pricing on the
2008 ABCP Facilities varied 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 upfront fees and unused commit-
ment fees, was three-month LIBOR plus 2.47 percent. The primary use of the 2008 Asset-Backed Financing
Facilities was to refinance comparable ABCP 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.
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 remained
materially unchanged.
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
remained materially unchanged.
On April 24, 2009, the Company extended the maturity of $21.8 billion of the 2008 FFELP ABCP Facility
for one year to April 23, 2010. The Company also extended its 2008 Asset-Backed Loan Facility in the amount of
$1.5 billion. The extended 2008 Asset-Backed Loan Facility matured on June 26, 2009 and was paid in full. A
total of $86 million in fees were paid related to these extensions. The 2008 Private Education Loan ABCP Facility
was paid off and terminated on April 24, 2009. The stated borrowing rate of the 2008 FFELP ABCP Facility was
the applicable funding rate plus 130 basis points excluding upfront fees. The applicable funding rate generally was
either a LIBOR or commercial paper rate. The terms of the 2008 FFELP ABCP Facility called for an increase in
the applicable funding spread to 300 basis points if the outstanding borrowing amount was not reduced to
$15.2 billion and $10.9 billion as of June 30, 2009 and September 30, 2009, respectively. If the Company did not
negotiate an extension or pay off all outstanding amounts of the 2008 FFELP ABCP Facility at maturity, the
facility would extend by 90 days with the interest rate generally increasing from LIBOR plus 250 basis points to
550 basis points over the 90 day period. The other terms of the facilities remained materially unchanged.
The maximum amount the Company could borrow under the 2008 FFELP ABCP Facility was limited
based on certain factors, including market conditions and the fair value of student loans in the facility. As of
December 31, 2009, the maximum borrowing amount was approximately $10.5 billion. Funding under the
2008 FFELP ABCP Facility was subject to usual and customary conditions. The 2008 FFELP ABCP Facility
was subject to termination under certain circumstances, including the Company’s failure to comply with the
principal financial covenants in its unsecured revolving credit facilities.
Borrowings under the 2008 FFELP ABCP Facility were non-recourse to the Company. As of December 31,
2009, the Company had $8.8 billion outstanding in connection with the 2008 FFELP ABCP Facility. The book
basis of the assets securing this facility as of December 31, 2009 was $10.2 billion.
On January 15, 2010, the Company terminated the 2008 FFELP ABCP Facility and entered into new multi-
year ABCP facilities (the “2010 Facility”) which will continue to provide funding for the Company’s federally
guaranteed student loans. The 2010 Facility provides for maximum funding of $10 billion for the first year,
$5 billion for the second year and $2 billion for the third year. Upfront fees related to the 2010 Facility were
approximately $4 million. The underlying cost of borrowing under the 2010 Facility for the first year is expected to
be commercial paper issuance cost plus 0.50 percent, excluding up-front commitment and unused fees.
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