Jan. 7 (Bloomberg) -- SLM Corp., the college-loan provider whose shares plunged 59 percent last year, named banker and turnaround specialist Anthony P. Terracciano chairman and rehired a finance executive to seek more than $30 billion in borrowing after a buyout collapsed.

Terracciano, 69, succeeds Albert Lord, who remains chief executive officer and will be a vice chairman, Reston, Virginia- based SLM said today in a statement. The company, known as Sallie Mae, tapped the former executive, John F. Remondi, 45, to become vice chairman and chief financial officer.

Lord, 62, had been chairman since March 2005. He steps aside less than a month after refusing to answer analysts' questions in a teleconference and ending it with an expletive. He had just returned as CEO, after a two-year absence, intending to stabilize Sallie Mae after the proposed $25.3 billion takeover fell apart. Terracciano's 45 years as a banker include a stint as president of First Union Corp., now Wachovia Corp.

Terracciano ``has an elder statesman quality,'' Richard Hofmann, an analyst at CreditSights Inc. in New York, said in an interview. ``Investors need to get more comfortable that there is a strategy. Bringing in a respected banking person is a step in the right direction.''

Sallie Mae rose $1.16, or 7 percent, to $17.83 at 4:01 p.m. in New York Stock Exchange composite trading.

Premium Widens

Sallie Mae's 5.45 percent notes due in April 2011 yielded 5.9 percentage points today more than the U.S. Treasury notes of comparable maturity, a premium that has about tripled since October as investors perceive more risk in holding Sallie Mae debt.

The risk of Sallie Mae defaulting on its debt increased to the highest ever. Credit-default swaps on Sallie Mae rose 20 basis points to 430 basis points, a sign of eroding confidence in credit quality, according to Phoenix Partners Group in New York. A basis point is 0.01 percentage point.

Terracciano also served as chairman and chief executive of First Fidelity Bank Corp., CEO of Mellon Bank, vice chairman of Chase Manhattan Bank, and non-executive chairman of Dime Bancorp Inc. and Riggs National Corp., Sallie Mae said.

Terracciano guided Riggs when it was sold in 2005 to PNC Financial Services Group Inc. The sale followed a scandal in which Riggs pleaded guilty to helping foreign leaders hide hundreds of millions of dollars.

Terracciano was also an architect of Dime Bancorp's $5.2 billion sale to Washington Mutual Inc. in 2002. He was brought in to improve Dime's performance in July 2000 after the bank received $238 million from Warburg Pincus.

His record ``seems to indicate he is a turnaround expert,'' said Sameer Gokhale, an analyst with Keefe, Bruyette & Woods Inc. in New York. ``That's what he is brought in here for.''

Terracciano also served as an adviser to Relational Investors LLC during its 17-month fight with Sovereign Bancorp Inc. The battle ended with the resignation of Sovereign Chief Executive Jay Sidhu and the appointment of Relational's Ralph Whitworth to the company's board in 2006.

Shares Downgraded

Remondi rejoins Sallie Mae from Par Capital Management in Boston, where he had been a portfolio manager since August 2005. He had been finance chief at the lender Nellie Mae, which Sallie Mae acquired in 1999. He became executive vice president for finance at Sallie Mae after helping transform it from a government-sponsored entity to an independent company.

Tom Joyce, a Sallie Mae spokesman, declined to comment.

Stuart Plesser, an equity analyst with Standard & Poor's in New York, downgraded Sallie Mae today to ``hold'' from ``buy'' because of a law cutting federal student loan subsidies, as well as higher financing costs.

Sallie Mae is refinancing $30 billion of debt and ``we believe that terms will be unfavorable and likely curtail'' the growth of subsidized student loans, Plesser said in a report. He reduced his 2008 earnings estimate to $1.93 a share from $2.42 and dropped his 12-month target to $20 from $25.

``My concern is that they may be having trouble raising $30 billion,'' Plesser said in a telephone interview today. ``There's a risk they can't do it at all. What kind of terms are they going to get for that financing? They are trying to refinance debt in a very difficult climate.''

From Dec. 13, the day before Lord became CEO, until the end of trading last week, Sallie Mae fell 40 percent.

No `Bottom-Line' Answers

Lord failed to persuade investors in a Dec. 19 conference call that Sallie Mae could rebound. He said he couldn't provide a ``bottom-line answer'' to questions about financing, telling analysts to instead call an investor relations official.

On the same call, Lord said analysts would have to pass through a metal detector to attend a company conference and uttered an expletive at the end of the call, expressing relief it was over.

``As Lord is working his way back in here as CEO, he has to win back some points,'' Hofmann said. Terracciano's appointment is ``a nice move from a corporate governance standpoint,'' showing Lord is willing to separate some power, Hofmann said. Lord previously served as CEO from 1997 to 2005.

``Considering what we view as Mr. Lord's contentious past with Wall Street, we consider the appointment a positive,'' S&P's Plesser said in a report today.

$60-a-Share Offer

J.C. Flowers & Co., Bank of America Corp. and JPMorgan Chase & Co., agreed in April to buy Sallie Mae for $60 a share.

Sallie Mae traded as high as $58 in July before the buyers grew skittish when borrowing costs became more expensive and Congress passed legislation, signed by President George W. Bush, that cut federal government subsidies to student lenders by $20.9 billion over five years.

Flowers argued that the law amounted to a material change to the agreement, and the investor lowered its offer to $50 a share, plus contingent payments. Sallie Mae rejected the revised bid and has sued Flowers, seeking a $900 million termination fee. A trial is scheduled for December in Delaware Chancery Court.

Failed Bets on Stock

As part of the deal, the Flowers group said it would provide as much as $30 billion in interim financing. Once the buyout fell through, Sallie Mae was faced with replacing the financing by a Feb. 15 deadline.

The company also entered into contracts to buy back stock at set times and prices, betting its value would increase. Instead, the stock fell.

The company said last week that it's in talks with 10 financial institutions to provide replacement financing.

To contact the reporter on this story: Matthew Keenan in Boston at mkeenan6@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net.

Last Updated: January 7, 2008 17:05 EST