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Sallie Mae Buys $28 Billion Of Student Loans From Student Loan Corporation

Published: 06:40 18 Sep 2010 AEST

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SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, announced today that it has reached an agreement to purchase $28 billion of securitized federal student loans and related assets from The Student Loan Corporation (SLC) (NYSE: STU), a subsidiary of Citibank, for $1.2 billion in cash.

The assets purchased include the residual interest in 13 of SLC’s 14 Federal Family Education Loan Program (FFELP) loan securitizations and its interest in SLC's loan related to the U.S. Department of Education’s Straight-A Funding asset-backed commercial paper conduit.

The transaction also includes the right to service these assets and administer the securitization trusts.

Following the transaction, Sallie Mae will manage or service approximately $200 billion in federal student loans.

The consideration for the acquisition will be financed entirely by a 5-year term loan provided by Citibank.  The loan has an interest rate of LIBOR plus 4.5%.

The transaction is expected to close by year-end 2010 following regulatory approvals and other customary closing conditions.

Sallie Mae provides funding, delivery and servicing support for education loans in the United States through the participation in the Federal Family Education Loan Program, as a servicer of loans for the Department of Education, and through its non-federally guaranteed Private Education Loan programs.

Sallie Mae was up 4.7% on Friday, while SLC surged more than 40% on the back of the news, trading at $29.86 as of 11:45am ET on the New York Stock Exchange.

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