JC Flowers, the alternative investor; private equity firm Friedman Fleischer & Lowe; Bank of America and JP Morgan Chase agreed to acquire the student loan provider in April for $25.5 billion (19 billion), Financial News reports.
Last month, Sallie Mae said it had been informed by the consortium that legislative proposals pending before the US House of Representatives and Senate could prevent the deal’s closing. The Democrats had introduced a bill that would slash subsidies to college student loan companies such as Sallie Mae which the White House has threatened to veto.
The pending legislation led Moody’s Investors Service to downgrade Sallie Mae to Baa1 from A2. The ratings agency said Sallie Mae’s fundamental credit strength had declined given the pending legislation and the acquisition not being completed, which will reduce the student lenders’ funding flexibility and result in higher interest costs on future debt issuance.
The $25 billion deal eclipses JC Flowers’ previous largest acquisition, the $5.5 billon buyout of Japan’s Shinsei Bank.