Here are some excerpts from the transcript of their conference call, which is provided by Seeking Alpha:
Securitization of FFELP assets increased in 2Q vs. 1Q but funding costs remain high:
"Through the first six months of 2008, we issued $11.8 billion in term
FFELP asset backed securities, including $7.1 billion in the second
quarter. The all in cost of this issuance in the quarter was 140 basis
points over LIBOR...Since the close
of the quarter, we securitized an additional $1.6 billion at an all in
cost of 85 basis points over LIBOR."
SLM plans to take advantage of Department of Education Liquidity Plan to reduce reliance on securitization market:
"We will take advantage of the funding program provided by the department and this will allow us to reduce our reliance on our asset backed financing facility and ultimately replace it with a smaller and significantly less costly facility in the future."
Implemented more stringent lending standards for private loans leading to 24% drop in private loan originations for the 2Q:
"Consistent with our announcement in the first quarter that we were
tightening our private lending standards including ceasing
non-traditional lending completely, private education loan originations declined 24% to $891 million in the quarter."
SLM expects to have average yield of LIBOR + 8% on private
loan portfolio and to originate about $7 billion in private loans.
With LIBOR today between 2.5% and 2.8% (depending on term) that would translate into loans averaging 10.5%-10.8%.
In
response to analyst's question, CFO Remondi indicated "I think the
pricing ranges that you are referring to (LIBOR + say 800bp or so) are
approximately right."
"....demand for liquidity to fund our business is going to be limited to our private credit portfolios which we would expect to originate about $7 billion in total this year."
SLM has seen delay in schools processing loans due to recent Stafford loan limit changes:
"In terms of application flows that we are seeing in to our centers
today, historically July is one of our busiest months and it’s been
much lighter than expected principally because of the increase in loan
limits that took place in the schools needing to update their software
and their financial aid management systems to accommodate that higher
loan level increase so we’ve seen a number of schools who have been
late in terms of processing applications."
SLM is focusing efforts on internal brands while reducing lender
partner originations:
SLM hopes to re-enter securitization market for private
loans, which has been closed (with exception of several smaller deals) for almost a year now:
Long-term solution for FFELP lenders resides in restoring
vibrant, lower cost securitization market which recognizes the
guarantee behind these loans :
"So, coming up with some form of structure that creates a greater
awareness or confidence or valuation of that guarantee by investors in
student loan asset backed securities would probably be the best thing
that could happen."
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