Merger Dispute

New York, NY: (Jan-28-08) Sallie Mae, a student lending giant, brought a lawsuit against its onetime buyers, which include the private equity firm J.C. Flowers & Company, JPMorgan Chase, and Bank of America, over its scuttled $25 billion buyout. The company agreed to settle with its onetime buyers, in exchange for a deal to refinance about $30 billion in debt. Following the settlement, Sallie Mae's lawsuit and the buyers' counterclaims will be dismissed, and the merger agreement terminated. Officials claim that securing the $30 billion credit line solves one of Sallie Mae's biggest problems and will very likely serve as a vote of confidence on the company's prospects. Since the near shutdown of the credit markets last summer, the company has been unable to issue new debt that is backed by its student loans, depriving it of a huge source of capital. As a result, it drew down its credit line, which was provided by JPMorgan and Bank of America as part of the buyout deal. [NEW YORK TIMES: DEBT SETTLEMENT]

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Published on Jan-28-08