Sallie Mae rattles S&P with loan sales

The Standard & Poor's credit rating agency on Thursday threatened to cut SLM Corp. (student lender Sallie Mae, based just south of Wilmington) to junk-bond status (which is where Moody's already rates the company) after longtime boss Al Lord said the company had sold nearly $4 billion of its $126 billion in old government student loans, and plans to sell a lot more to raise cash.

The sale caught S&P analyst Adom Rosengarten off balance because he had expected a "gradual" runoff of loans as they are repaid, not sudden sales, he told investors in a note. The "shift in the company's strategy" will hurt future cash flow as Sallie scrambles to develop private loans and other products to replace the government-guaranteed loans that the Obama administration has taken over from for-profit lenders, Rosengarten warned.

But shareholders don't seem worried; on Friday they bid Sallie shares up almost to $19, the highest since the spring of 2008. Indeed, "we are surprised" by S&P's threat, wrote analyst Sameer Gokhale in a note to clients at Janney Capital Markets.

Gokhale recommends the stock even after its recent rise. He thinks S&P's warning has made it less likely that Lord will keep selling loans. A Kensington native, Lord has announced plans to step down, and the company is searching for a replacement.

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