WASHINGTON (AP) – SLM Corp., commonly known as Sallie Mae, on Thursday said it expects the investors seeking to buy it for $25 billion to honor their commitments.
“Our contract is with Bank of America and JPMorgan Chase, two of America's largest and strongest banks,” the nation's largest student lender said in a release. “We expect these banks to honor their commitments under that contract, not breach the contract,” which includes a $900 million breakup fee.
SLM issued the statement in response to a New York Times report, attributed to anonymous sources, that said the buyout consortium, which is led by private equity firm J.C. Flowers & Co., plans to seek a lower price.
A spokesman from JPMorgan Chase & Co. declined to comment. Representatives from J.C. Flowers and Bank of America Corp. did not immediately return calls Thursday morning.
In recent months, banks have become nervous about massive loans on their books and have asked private equity firms to front more capital and lessen the amount of money borrowed. Cerberus Capital Management in July had to inject more equity into its takeover of Chrysler Group from Germany's Daimler. More recently, Home Depot lowered the sale price on its wholesale supply unit by 17 percent to complete its sale to private equity firms.
Uncertainty has clouded the Sallie Mae deal for more than a month as the investors who agreed to buy it for $60 a share have said legislation expected to be signed shortly by President Bush could kill the takeover.
Congress earlier this month sent Bush the bill, which would cut about $20 billion in government subsidies to banks that make student loans in an effort to boost financial aid for college students.
The investors' group previously has said the legislation “could result in a failure of the conditions to the closing of the merger to be satisfied.”
Sallie Mae responded last month by saying the deal “can and should be consummated in October,” and on Thursday reiterated its position that the bill “does not and will not constitute a material adverse effect under the merger agreement.”
Shares of Reston, Va.-based SLM dipped 36 cents to $48.19 in morning trading, while Bank of America slid 14 cents to $50.93 and JPMorgan added 7 cents to $47.64.