College student lender Sallie Mae is suing a group of private equity firms and banks that are backing out of a $25-billion buyout deal. The group—J.C. Flowers & Company, Friedman Fleischer & Lowe, JP Morgan Chase and Bank of America—had set a deadline of today for negotiating new terms, or they'll walk away from the deal, despite a $900-million breakup fee, reports the New York Times.
The would-be buyers argue that Sallie Mae's financial picture has declined and earnings will be further hurt by legislation reducing subsidies to student lenders. “We regret bringing this suit," said Sallie Mae's chairman. "Sallie Mae has honored its obligations under the merger agreement. We ask only that the buying group do the same."