WASHINGTON — Just days into his second turn as CEO of Sallie Mae, Albert Lord couldn’t find the right words to soothe Wall Street.
With frustrated analysts seeking more details about the struggling student lender’s finances than Lord was willing — or able — to provide, a half-hour conference call was punctuated by awkward exchanges and an expletive. When it was over, Sallie’s stock soon plummeted to a five-year low.
Lord sought to calm investors in the wake of Sallie Mae’s failed $25 billion buyout and its previously reduced profit forecast, which the company attributed last week to rising loan defaults and a new law that slashed government subsidies for student loans. He also offered steps the company, formally known as SLM Corp., was considering, including cutting its dividend and using stock to acquire a smaller student lender.
“This is a very challenging time,” he said. “The goal here is to get out of deal mode, and into the growth mode.”
But analysts voiced dissatisfaction with what they considered to be a lack of details from Lord, especially about the company’s ability to package student loans into investments. The market for all kinds of risky debt has suffered as defaults rise on home loans, credit-card debt, auto loans and student loans.
“We’re trying to figure out what your stock is going to be worth and you’ve got to give us some guidance,” Bill Kavaler of investment bank Societe Generale said during the call. “You’ve got to give some numbers.”
He never did.
After four analysts finished asking questions, and a conference call moderator’s invitation for more questions was met with silence, Lord — who believed the call was over, according to a spokesman — said to Sallie’s head of investor relations: “There’s no questions. Let’s get the (expletive) out of here.”
Shares of Reston, Va.-based Sallie sank $5.98, or 21 percent, to $22.89 — far below the per-share price an investor group led by private-equity firm J.C. Flowers &Co. had originally offered to pay for the nation’s largest student lender.
“Rather than providing the reassurance and details investors were looking for …(Sallie Mae’s) management created more uncertainty,” Friedman, Billings, Ramsey &Co. analyst Matt Snowling wrote in a research note. Snowling lowered his 12-month price target for the stock by $12 to $26.
A landmark student-loan law that took effect Oct. 1 cut billions of dollars in federal subsidies for student lenders like Sallie, which lost $344 million in the third quarter. Moreover, defaults are mounting on student loans, while credit-market tremors similar to those linked to the mortgage crisis have begun to show up in the $85 billion student-loan market.
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