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Sallie Mae Stock Price Falls 11%

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By ALAN ZIBEL, The Associated Press

Published: December 28, 2007

WASHINGTON - Sallie Mae's planned $2.5 billion stock sale doesn't answer all of Wall Street's questions about the struggling student lender's future.

Although some analysts see the company's financing woes as a short-term problem, others highlight serious concerns about the Reston, Va., company, such as soaring loan defaults and a potential cut in its credit ratings.

This month, Sallie Mae, formally known as SLM Corp., lowered its earnings forecast for next year by more than 13 percent, blaming a new law that trims federal subsidies and the need to conserve cash to offset bad student loans. Then, Chief Executive Officer Albert Lord held a contentious conference call last week in which he dismissed several analysts' questions and ended the call with an expletive.

These developments only compounded pressure on the company's stock price, which has fallen steadily since July, when a group of investors who eventually backed out of buying Sallie Mae for $25 billion first indicated the deal could be in trouble.

Shares fell $2.48, or 11 percent, to close at $19.65 Thursday, a day after the company said it would spend $2 billion from the stock offering to settle unprofitable contracts that require it to buy back shares at above-market prices. The company's shares have plunged to their lowest price since early 2001.

Sallie disclosed in a regulatory filing Thursday that federal education officials plan to examine whether the company's billing practices complied with federal law. Sallie also noted a discrimination lawsuit filed against it last week in a Connecticut federal court by two women who alleged the company charged higher prices to students at schools with high black and Hispanic populations. It denied the allegation.

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