Sallie Mae to sell $2.5 billion in common, preferred stock

SLM Corp., the government-backed student lender better known as Sallie Mae, said Wednesday that it would sell $2.5 billion of common and preferred stock.

The company said it would use about $2 billion of the proceeds to buy back 44 million shares under an outstanding equity forward purchase contract, and the remainder for general corporate purposes.

UBS Investment Bank and Citi are acting as joint bookrunning managers for the offerings, totaling $1.5 billion worth of common stock and $1 billion of convertible preferred shares.

Sallie Mae shares sank to a five-year low last week after the struggling company’s chief executive failed to provide enough answers about its finances and details on why a $25-billion buyout of the company fell through.

Its shares slumped $1.29, or 5.8%, to $20.84 after hours. The stock had risen 7 cents to close the regular session at $22.13.