Congressional legislation could stymie SLM deal

12 July 2007

The consortium planning to buy student lender SLM for $25 billion could pull out of the deal, owing to congressional legislation to cut the rate of interest on its loans.

Legislation passed in the House this week is set to halve the rate of interest on government backed student loans.

Meanwhile, a cap to annual loan repayments at a fixed percentage of the borrower's income would also be introduced.

As a result, the consortium which is led by JC Flowers and includes JP Morgan and Bank of America has informed SLM - popularly known as Sallie Mae - that the legislation "could result in a failure of the conditions to the closing of the merger to be satisfied".

However, SLM refutes that the proposed legislative changes mean that the conditions of the companies' acquisition agreement have been breached and intends to go ahead with the deal.

A statement from the largest student loan provider in the US said that it "strongly disagrees with this assertion, intends to proceed toward the closing of the merger transaction as rapidly as possible, and will take all steps to protect shareholders' interests".

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