Fitch IBCA Rates SLM Holding Corp Preferred Stock 'A-'.

NEW YORK--(BUSINESS WIRE)--Nov. 12, 1999--

Fitch IBCA rates SLM Holding Corp.'s $150 million cumulative redeemable preferred stock 'A-'. SLM Holding is the holding company formed from the privatization of the Student Loan Marketing Association ("Sallie Mae").

Fitch IBCA assigns substantial equity credit to this instrument and views the preferred stock issuance positively as this will bolster SLM Holding's capitalization.

The rating reflects SLM Holding's dominant position in the acquisition and servicing of government guaranteed Federal Family Education Loan Program ("FFELP") student loans, consistent earnings performance, funding access through Sallie Mae until 2008, and very low credit and interest rate risk in the company's managed loan portfolio. Rating concerns center on SLM Holding's potential exposure to political risk related to the future direction of the government guaranteed student loan program, growing reliance on securitization, low capitalization (although bolstered by the preferred stock issuance) and balance sheet exposure to securitization residuals.

SLM Holding has maintained its dominant position in the acquisition and servicing of FFELP student loans, currently accounting for approximately 35% of the market. The company's managed student loan portfolio stood at $53.6 billion at September 30, 1999. Since Sallie Mae's inception in 1972, the company has consistently been profitable owing to the high credit quality of the company's assets and lending margins set by the U.S. government. Fitch IBCA expects this trend to continue over the foreseeable future. The excellent credit quality of the company's managed portfolio arises from the high proportion of government guaranteed loans where between 98%-100% of the loan balance is guaranteed by the federal government. As a result, historical net charge-off rates have been extremely low. Interest rate risk (primarily basis risk) is also very low since SLM Holding utilizes a 'matched funding' strategy and substantially eliminates basis risk through an active hedging program.

SLM Holding benefits from the advantageous funding available to the GSE through 2008. However, in the future SLM Holding intends on increasing its reliance on the securitization market for funding, replacing financing out of the GSE. Notwithstanding, Fitch IBCA expects that SLM Holding will develop diversified funding access over time to reduce its reliance on the securitization market during periods of financial market stress. SLM Holding also faces competitive pressures resulting from the Department of Education's Federal Direct Loan Program ("FDLP") which accounts for 1/3 of government guaranteed student loans.

SLM Holding was formed on July 31, 1998 as a result of the Student Loan Marketing Reorganization Act of 1996 (Privatization Act). The Act called for the creation of a holding company to acquire the outstanding shares of the Student Loan Marketing Association (Sallie Mae). Under the Act, Sallie Mae would continue to operate as a GSE under SLM Holding until September 30, 2008. Debt issues of the GSE would continue to be government guaranteed until maturity.

SLM Holding, based in Reston, VA. is the largest acquirer and servicer of FFELP student loans. At Sept. 30, 1999, the company reported managed assets of $61.7 billion and stockholders equity of $633.7 million. Its primary operating subsidiary, Sallie Mae, was chartered by Congress in 1972 to foster a secondary market for higher education loans.