Sallie Mae Shocks Bondholders in Asset Strip: Corporate Finance

SLM Corp. dealt bondholders a blow as the student loan company prepares to move cash-generating assets out of their reach and rely more heavily on secured funding as it seeks to split into two separate entities.

Fitch Ratings cut the company known as Sallie Mae to speculative grade yesterday, citing the new structure’s weaker credit profile while Standard & Poor’s and Moody’s Investors Service said they may reduce the credit as well. Newark, Delaware-based SLM’s bonds lost more than $200 million in value after the disclosure, according to data compiled by Bloomberg.