Sallie Mae (SLM) Appoints Jack F. Remondi as CEO; Will Split Company

May 29, 2013 7:33 AM EDT
Sallie Mae (NASDAQ: SLM), formally SLM Corporation, today announced its Board of Directors has appointed John (Jack) F. Remondi chief executive officer, effective immediately. Mr. Remondi succeeds Albert L. Lord, Sallie Mae’s vice chairman and chief executive officer, who is moving up his plans to retire from the Board of Directors and executive management.

In addition, the Board authorized management to pursue separation of the company’s existing businesses into two, separate, publicly traded entities -- an education loan management business and a consumer banking business -- to unlock value and enhance long-term growth potential.

Mr. Remondi has served as president and chief operating officer since 2011. Prior to that, he served as vice chairman and chief financial officer. Throughout his tenure with Sallie Mae, he has been instrumental in executing strategic initiatives, such as the privatization of the company from a government-sponsored enterprise, the navigation of the global financial crisis and the business restructuring following the end of the private sector federal student loan program.

Our Board of Directors has determined that Jack is the one to build on Al’s long legacy of success and lead Sallie Mae through its next strategic transformation,” said Anthony P. Terracciano, chairman. “Jack brings extensive knowledge about our core financial and operational competencies, and the Board and I are confident that he will achieve the important task of unlocking more value from today’s franchise by creating two, market-leading companies from the portfolio of businesses managed currently. It is a testament to Al’s leadership that we are now ready to take this next step, and I thank him for his years of service and his unwavering commitment to shareholder value.”

The strategic plan will create two companies, each initially owned by Sallie Mae’s existing shareholders and the leader in its respective business lines. Sallie Mae would form an education loan management business comprised of the company’s portfolios of federally guaranteed (FFELP) and private education loans, as well as most related servicing and collection activities. This will be the leading education loan portfolio management, servicing and collection company, and Mr. Remondi will continue as its chief executive officer.

Sallie Mae’s private education loan origination and servicing businesses, including Sallie Mae Bank and the private education loans it currently holds, will operate separately under the Sallie Mae brand. This will be the leading consumer education lending franchise with expertise in helping families save, plan and pay for college. Joseph DePaulo, executive vice president, banking and finance, will lead this business as chief executive officer. Mr. DePaulo joined Sallie Mae as executive vice president and chief marketing officer in 2009, bringing 25 years of experience in the consumer banking industry at MBNA and as co-founder and CEO of Credit One Financial Solutions.

Commenting about the current changes, Mr. Lord said, “After 31 years I choose to focus only on good memories. I do regret not completing the spin or achieving more of the intrinsic value in the share price before my exit. I believe the Board remains committed to the simple two-part strategy we implemented in 2012: return legacy business capital and invest in our Smart Option growth business. Recent success developing the FFELP residual market has and will facilitate the capital returns that have sparked a nearly 75 percent share price improvement in the last 12 months. Separating the company is the logical next step and I wish Jack, Joe and the Board well.”

“This strategic separation represents a natural business evolution since FFELP originations ended in 2010. Sallie Mae has successfully adapted its businesses to remain at the forefront of education lending and servicing,” said Jack Remondi, chief executive officer. “Sallie Mae is the largest originator of private education loans, and we have diligently used credit standards that foster responsible borrowing. We’re also the largest servicer of private and FFELP loans with an important contract with the Department of Education. By separating our current operations into two businesses, we will facilitate focus on Sallie Mae’s growing consumer banking business and management of its education loan portfolios.”

It is expected the separation, if completed, would be effected via a tax-free distribution of common stock to Sallie Mae’s shareholders. The details of the planned separation, including the precise allocation of assets between the two companies, remain under consideration at this time. Based on current plans and Sallie Mae’s March 31, 2013, financial information:

* The education loan management business’ principal assets are likely to consist of approximately $118.1 billion in FFELP Loans, $31.6 billion in private education loans, $7.9 billion of other interest-earning assets; and a leading education loan servicing platform that services loans for approximately 10 million federal education loan customers, including 4.8 million customer accounts serviced under the company’s contract with the U.S. Department of Education. In aggregate, this company will own approximately 95 percent of Sallie Mae’s existing assets and remain obligated for the company’s senior indebtedness.
* The consumer banking business’ assets are likely to include approximately $9.9 billion of total assets comprised primarily of private education loans and related origination and servicing platforms; cash and other investments; and the Sallie Mae Upromise Rewards program.

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