Sallie Mae Corporate Bonds Off Limits To CUs

- ALEXANDRIA, Va. (04/08/02) - USA Education, theholding company for Sallie Mae, made its debut in the long-termcorporate bond market last week with an issuance of $850 million infive-year notes, the student loan giant's first sale of fixed-ratedebt outside the asset-backed. But the new debt, which yields ahealthy premium over Treasuries, is off limits to federal creditunions, which are still restricted in buying only those securitiesissued through the company's government sponsored enterprise,Sallie Mae, according to NCUA. That's because the Federal CU Actonly permits debt issued by a GSE, including Sallie Mae, but notcorporate debt such as that issued by Sallie's parent, USAEducation, an NCUA official told The Credit Union. "The statute'sreal clear," he said. Because of its continued GSE status, SallieMae debt is rated triple-A by the major credit agencies, while USAEducation obligations have a lower credit rating. USA Education isin the process of a privatization that will eventually eliminatethe GSE status of Sallie Mae.