Market leading student lender Sallie Mae (NYSE:SLM) announced Thursday that it will raise $2.5 billion through concurrent offerings of common and convertible preferred stock. The news sent the shares down 7.7% to $20.42, a near-seven-year low. Virginia-based Sallie Mae, which has lost two-thirds of its value since the collapse of a planned $25.3 billion takeover by a private consortium, is struggling to raise money and protect its credit rating. The company priced 101.78 million shares at $19.65 and is offering $1 billion in 7.25% mandatory convertible preferred stock. "Although we are disheartened by the size of the offering, we note that most of the proceeds will be used to buy back 44 million shares [from Citigroup at $45.25 each], somewhat mitigating the dilutive effect of the offering," said S&P equity analyst Stuart Plesser. Sallie Mae had agreed to that "equity forward purchase contract" in the hope its share price would rise, but the shares have lost $15 billion in value since the collapse of the buyout. Analysts estimate the contract could ultimately cost Sallie Mae $1-1.6 billion.
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