Just two days after "It's Ten Days and Counting...", it appears we have an interim answer on Student Loan Corporation's future funding. In an 8-K filing, Student Loan Corporation provided details on an extension of their existing facility with Citi as well as the broad outlines for a one-year agreement that they are currently negotiating with Citi.
First the extension:
"The
Extension changes the expiration date of the Omnibus Credit Agreement
from December 31, 2009 to January 31, 2010. In addition, the Extension
lowers the maximum aggregate credit available under the Omnibus Credit
Agreement from $30 billion to $10.5 billion, effective January 1, 2010."
In terms of the state of their current negotiations with Citi, the company is clear that funding costs will rise thereby reducing net income:
"The
terms of the potential replacement to the Omnibus Credit Agreement that
currently are being negotiated with CBNA are significantly less
favorable to the Company than the current Omnibus Credit Agreement and
are expected to substantially
increase funding costs and reduce net income. Terms currently under
discussion include: (1) $6.5-7.0 billion in aggregate credit available
for new borrowings, including separate tranches (with their own
sublimits and pricing) for overnight funding, FFELP loan funding,
private loan funding and illiquid asset funding; (2) an initial term of
only 364 days; (3) a pledge of most of the Company’s financial assets
to secure the Company’s obligations; (4) commitment and unused
liquidity fees; and (5) a comprehensive
package of representations, warranties, conditions, covenants
(including various financial covenants) and events of default...The terms of the proposed agreement are reflective of, among other things, the still-challenging capital market conditions."
The company expects that the replacement facility will be negotiated by the end of January 2010.
Student Loan Corp.'s recent focus on conserving capital showed up in their 3Q origination figures with private loans down 47% and federal loans down 10% from the year earlier period. For financial aid administrators going through the lender selection process, it would certainly be nice for the company to provide some clarity on their commitment to student lending after they have secured this financing. Let's hope this appears in their next quarterly report since the company does not do conference calls or typically appear at investor conferences (something about having an 80% owner that doesn't necessarily invite transparency).
Hey could the author of this blog please contact me at liberatas05 at gmail dot com please? Thanks.
Posted by: WWilliams | December 24, 2009 at 01:48 PM