RESTON, Va. – Student loan giant Sallie Mae said it lost $1.6 billion in the fourth quarter–largely due to the cost of a failed bet on itself amid a $60-a-share takeover offer.
The fourth quarter loss included a $1.5 billion net loss on a forward equity contract the company made on the unsuccessful $25 billion takeover that fell apart last summer. The failed bet forced Sallie Mae to buy back 44 million of its own shares from Citicorp earlier this month at $48.50 each, as the share price was plummeting to under $20 after the $60-a-share takeover collapsed.
Fourth quarter results also included an additional $545 million in loan loss reserves as more non-guaranteed loans are defaulting, the company said.
To address the growing number of delinquencies and defaults on non-guaranteed student loans, Sallie Mae said it is reducing lending to students it considers unlikely to graduate or attending schools with inferior graduation rates.
For the full year, Sallie reported a net loss of $896.4 million, or $2.26 a share, compared with net profit of $1.15 billion, or $2.63 a share, in 2006.
