UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
FEBRUARY 8, 2008
NELNET, INC.
(Exact name of registrant as specified in its charter)
Nebraska 001-31924 84-0748903
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
121 SOUTH 13TH STREET
SUITE 201
LINCOLN, NEBRASKA 68508
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01 OTHER EVENTS.
The interest rates on certain of the Company's asset-backed
securities are set and periodically reset via a "dutch auction" ("Auction
Rate Securities") or through a remarketing utilizing broker-dealers and
remarketing agents ("Variable Rate Demand Notes"). The Company is currently
sponsor on approximately $2.0 billion of Auction Rate Securities and $0.9
billion of Variable Rate Demand Notes.
For Auction Rate Securities, investors and potential investors submit
orders through a broker-dealer as to the principal amount of notes they wish
to buy, hold, or sell at various interest rates. The broker-dealers submit
their clients' orders to the auction agent, who then determines the clearing
interest rate for the upcoming period. Interest rates on these Auction Rate
Securities are reset periodically, generally every 7 to 35 days, by the
auction agent or agents. As previously disclosed by the Company, interest
rates on these securities had widened during the third quarter of 2007 by as
much as 50 to 100 basis points over historical levels and have continued to
widen in the fourth quarter of 2007 and first quarter of 2008. In recent
weeks as part of the ongoing credit market crisis, several auction rate
securities from various issuers have failed to receive sufficient order
interest from potential investors to clear successfully, resulting in failed
auction status. Since February 8, 2008, certain Auction Rate Securities
backed by student loans, including some of the Company's, have failed in
this manner. Under normal conditions, the banks would step in when investor
demand is week. However, as of recently they have been allowing these
auctions to fail.
As a result of a failed auction, the Auction Rate Securities will
generally pay interest to the holder at a maximum rate as defined by the
governing documents or indenture. While these rates will vary slightly by
class of security, they will generally be based on a spread to Libor or
Treasury Securities and will approximate the current one month LIBOR rate
plus 100 to 150 basis points. The maximum rate for Variable Rate Demand
Notes is based on a spread to Libor or Prime plus a defined amount above
these indexes ranging from 175 to 200 basis points.
The Company cannot predict whether future auctions related to its
Auction Rate Securities will be successful. The Company is currently seeking
alternatives for reducing its exposure to the auction rate market, but may
not be able to achieve alternate financing for some or all of its Auction
Rate Securities. The process for establishing the rates for the Company's
Variable Rate Demand Notes is similar; however, the Company has only
experienced limited disruption on the pricing of these securities.
As previously disclosed, the legislative changes in September 2007
and capital market disruption that began in the third quarter of 2007
continues to impact the Company's operating results. The capital market
disruption has continued into the first quarter and in certain areas, has
deteriorated since year end. Since the Company cannot determine nor control
the length or depth of the capital market disruption, it plans to be more
selective in pursuing origination activity, in both the school and direct to
consumer channels and will continue to review the viability of continuing to
originate and hold other types of student loans, particularly private loans.
As a result of these items, the Company will experience a decrease in
origination volume compared to historical periods.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: February 13, 2008
NELNET, INC.
By: /S/ TERRY J. HEIMES
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Name: Terry J. Heimes
Title: Chief Financial Officer