Private equity firms J. C. Flowers & Company and Friedman Fleischer & Lowe were going to buy Sallie Mae, the student loan organization, for $25 billion. When credit problems started to hit big buy-out deals, the market got nervous. As The New York Times noted "Shares of SLM closed yesterday at $48.55, because investors expect a price cut."
The planned deal may now fall apart because the buyers plan to go back to Sallie Mae and ask for a better price. They would pay the company a $900 break-up fee, which would be cheap if they think that an over-leveraged purchase would fall apart under the weight to too much debt.
What began as a reset deal for a buy-out of the supply unit of Home Depot (HD) is now beginning to spread. Morgan Stanley (MS) reported weak earnings yesterday after it marked down a number of loans it had made for big buy-outs. Investment banks are left holding the debt because institutional buyers don’t want to touch something that seems to have become so risky.
The losers in the current busted deal are Sallie Mae shareholders. They watched their shares move from $41 o $56 when the deal was announced. They may now get to see those shares drop below $40.
Douglas A. McIntyre
The #1 Thing to Do Before You Claim Social Security (Sponsor)
Choosing the right (or wrong) time to claim Social Security can dramatically change your retirement. So, before making one of the biggest decisions of your financial life, it’s a smart idea to get an extra set of eyes on your complete financial situation.
A financial advisor can help you decide the right Social Security option for you and your family. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
Click here to match with up to 3 financial pros who would be excited to help you optimize your Social Security outcomes.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
