A casualty of the liquidity crisis in the private equity industry, US student loan provider SLM Corporation, widely known as Sallie Mae, has filed a lawsuit in Delaware Chancery Court agai
A casualty of the liquidity crisis in the private equity industry, US student loan provider SLM Corporation, widely known as Sallie Mae, has filed a lawsuit in Delaware Chancery Court against JC Flowers, JPMorgan Chase, Bank of America and others following their attempt to drop or renegotiate their agreed USD25bn acquisition of SLM.
The lawsuit seeks, among other things, a declaration that the members of the buyer group have repudiated the acquisition agreement, that no material adverse effect has occurred under the terms of the agreement, and that Sallie Mae may terminate the agreement and collect the stipulated break fee of USD900m.
On October 3, Sallie Mae notified the buyer group that all conditions regarding closing of the acquisition had been satisfied, and set November 5 as the closing date. In response, the buyer group claimed that the conditions laid down had not been satisfied because of, among other things, the alleged occurrence of a ‘material adverse effect’ under the terms of the agreement.
Albert Lord, chairman of Sallie Mae’s board, says: ‘We regret bringing this suit. Sallie Mae has honoured its obligations under the agreement. We ask only that the buyer group do the same. We are prepared to close under the contract the parties signed in April.’
SLM Corporation is the leading US provider of programmes for saving and paying for higher education costs. The company manages USD153bn in education loans and serves nearly 10 million student and parent customers. Through its Upromise affiliates, the company also manages USD18bn in 529 college-savings plans, and 8 million members have joined Upromise to help save for college.
Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors and state and federal agencies.
