NEW YORK - The risk of SLM Corp. defaulting on its debt rose to the highest ever as the appointment of a chairman and chief financial officer at the biggest US education lender failed to ease concerns that the company's financial standing will deteriorate further.
Credit-default swaps on Sallie Mae, as the Reston, Va-based company is known, rose 20 basis points to 430 basis points, a sign of eroding investor confidence in credit quality, according to broker Phoenix Partners Group in New York. Sallie Mae said yesterday it appointed former First Union Corp. president Anthony P. Terracciano as chairman, succeeding Albert Lord, and named John F. Remondi vice chairman and chief financial officer.
Sallie Mae, which in October reported its largest quarterly loss in at least 17 years, said last week it needs to curtail loan originations and some services. The company also is talking with 10 financial institutions about refinancing more than $30 billion in debt. About $8.4 billion in unsecured debt matures this year.
"The company has been in meltdown mode the past few weeks," Kathleen Shanley, an analyst at Gimme Credit LLC in Chicago, said in an e-mail. "The company still faces significant operating and financial challenges."
Stock investors showed more optimism than their credit counterparts. Sallie Mae rose $1.16, or 7 percent, to $17.83 in New York Stock Exchange composite trading yesterday.
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