Sallie Mae to be bought, taken private
Student loan giant Sallie Mae agreed Monday to be bought out for $25 billion in what will be the largest buyout of a financial services company ever. Sallie Mae - which will be taken private by four buyers: large banks JPMorgan Chase and Bank of America and private equity firms J. C. Flowers and Friedman Fleischer & Lowe - is the nation's largest student lender, handling 23 percent of the nation's student loans with a $142 billion portfolio.
The two private equity firms will pay $8.8 billion for the SLM Corporation, as Sallie Mae is officially known, and the remainder will be financed with debt, the New York Times reported Tuesday. Those firms will own just over half of the company, while JPMorgan Chase and Bank of America will own the other half. Under the terms of the agreement, the two banks must guarantee $200 million in backup financing, which would allow Sallie Mae to keep providing low-interest loans even if the company has future trouble accessing capital.
Still, consumer advocacy groups, industry analysts and the government may have something to say before the deal goes through, the Times reported. Yesterday, the three major credit rating agencies - Fitch, Standard & Poor's and Moody's - either lowered Sallie Mae's ratings or put the company on watch. Advocacy groups are also complaining about the creditor's use of debt in a business with traditionally low interest rates. The deal comes as Washington threatens to cut subsidies that allow student lenders to keep interest rates low.
Texas college closes due to bomb threat
A non-specific bomb threat shut down St. Edward's University Tuesday as students nationwide remain skittish over Monday's shooting rampage at Virginia Tech.
Students at the Austin, Texas, liberal arts college were evacuated from the school's campus, gathering on a nearby athletic field, after a note threatening to bomb St. Edward's was found yesterday morning, the Daily Texan, the student newspaper at the University of Texas at Austin, reported Tuesday. Students were gradually allowed back on campus as college and Austin police officers inspected campus facilities.
St. Edward's dean of students sent a mass e-mail, and loudspeakers at off-campus apartments were used to warn students to stay away from the campus. Students said they were impressed with the school's quick response.
"This type of response is absolutely typical regardless of the tragic events of yesterday," Mischelle Amador, the college's director of communications, told the Texan.
Police took the threat seriously because they felt it could reasonably be carried out, Austin Police Department Corporal Derek Israel told the Texan. "Given what's going on nationally, it's a very credible threat."
Austin and university police are investigating the threat and currently have no suspects.
