Credit Rating Cut for Sallie Mae

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The SLM Corporation, the educational lender known as Sallie Mae, had its long-term credit ratings cut by Moody’s Investors Service to two levels above junk Tuesday on concern that a change in the company’s strategy will erode profitability.

Moody’s reduced Sallie Mae’s senior unsecured long-term debt rating to Baa2 from Baa1 and said the outlook was “negative,” according to a statement Tuesday.

Sallie Mae said it had hired a chief credit officer, filling a new position, as it makes more loans that are not guaranteed by the federal government.

The lender is trying recover from a sharp cut in federal subsidies to such guaranteed loans, an aborted $60-a-share buyout bid, money-losing investments in contracts to buy its own stock, higher borrowing costs and investors’ shunning of the kind of asset-backed debt that represented a large part of its financing.

NY Times

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