Ex-Sallie Mae Suitor Tries to Dodge Breakup Fee in Court

Investor group doesn't want to cough up $900M
By Colleen Barry,  Newser Staff
Posted Oct 16, 2007 4:13 AM CDT
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(Newser) – The group that offered to buy out educational lender Sallie Mae for $25 billion is now seeking court approval to back out and avoid paying a $900 million break-up fee. The investor group, including Bank of America and JPMorgan Chase, is arguing that recent legislation will reduce the student loan corporation's profits, which investors see as "material adverse circumstances" and grounds to get out of the deal without penalty.

Sallie Mae is insisting that if investors want out, they have to pay the fee. "This is now a fight over $900 million. Let's not pretend there's still a deal on the table," said a source.  Delaware courts, where the dispute will be resolved, have traditionally held companies to agreements to pay termination fees. (Read more student loans stories.)