- The Washington Times - Tuesday, January 8, 2008

ASSOCIATED PRESS

Battered in recent months because of a failed buyout and higher borrowing costs, shares of Sallie Mae jumped yesterday after the Reston company named a banking industry turnaround specialist as its new chairman.

Analysts are not convinced, however, that new blood on its board is enough to resuscitate the nation’s largest student lender.

Sallie Mae’s new chairman is Anthony P. Terracciano, known as “Tony the Tiger” for his experience advising troubled banks and working on sales of some of them.

The 68-year-old executive has served as president of First Union Corp., now Wachovia Corp., chairman and CEO of First Fidelity Bank Corp., president and chief operating officer of Mellon Bank, vice chairman of Chase Manhattan Bank, and nonexecutive chairman of both the Dime Bank and Riggs National Corp.

Former Sallie Mae Chairman Albert L. Lord, who held that title for three weeks, has been appointed vice chairman and will remain CEO.

Shares of Sallie Mae, formally known as SLM Corp., gained $1.16, or 7 percent, to close at $17.83 yesterday. They have traded between $16.35 and $58 in the past year.

Before yesterday’s rally, shares of Sallie Mae had plummeted amid higher borrowing costs and the collapse of a $25 billion buyout by an investor group led by private-equity firm J.C. Flowers & Co. that has ended up in court.

The investor group has argued it should not have to pay a $900 million fee for walking away from the $60-per-share deal because of significant changes in economic or regulatory conditions affecting the company.

“Clearly, the market has lost confidence in Albert Lord, who was governing the ship when the Flowers deal was lost,” said Wayne State University law professor Steven Davidoff, who specializes in corporate governance and takeovers. “This could be a sign that [Mr. Terracciano] can restore some of that credibility.”

Sallie recently was forced to slash its year-end earnings forecast, hold a special sale of stock to raise $2.9 billion in cash and has said it would cut back on its core business of making student loans because of market conditions and a new student-loan law that cut billions of dollars in federal subsidies.

David Long, an analyst with William Blair & Co. LLC, said he had never met Mr. Terracciano but had “no problem” with his appointment. Still, he said, yesterday’s stock bump had more to do with SLM shares dropping more than 10 percent on Friday than the naming of a new chairman.

Sallie Mae will release its fourth-quarter earnings on Jan. 23.

After the company cut its earnings guidance last month, the 62-year-old executive held a contentious conference call with analysts in which he dismissed several questions and ended the meeting with an expletive.

His tone was more upbeat yesterday. “Mr. Terracciano has a long and successful track record of delivering on his commitments to shareholders,” Mr. Lord said. “When I asked the board to consider returning to a split of the chairman and chief executive positions, Tony was the logical choice.”

John F. Remondi, 45, who most recently served as portfolio manager at investment manager Par Capital Management, has rejoined Sallie Mae as vice chairman and chief financial officer. The company’s board now has 14 members.

Mr. Remondi, who joined Sallie Mae in 1999, helped the company’s transformation from a government-sponsored entity to a private organization. He replaces C.E. Andrews, who was CFO until May and now serves as president.

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