Freddie Mac Prices Second STACR Credit Risk Sharing Transaction of 2014
April 02 2014 - 12:52PM
Marketwired
Freddie Mac Prices Second STACR Credit Risk Sharing Transaction of
2014
MCLEAN, VA--(Marketwired - Apr 2, 2014) - A $966 million
offering of the Freddie Mac (OTCQB: FMCC) Structured Agency Credit
Risk (STACR®) debt notes, Series 2014-DN2, priced today. This is
Freddie Mac's second STACR offering this year where private
investors and not taxpayers predominately take the credit risk.
"We are pleased with the markets' appetite for these notes with
more than 75 investors participating. We've now brought four
offerings to market since last July, all of which were
well-received and traded well. Our goal is to have regular,
consistent issuances at least quarterly," said Donna Corley, senior
vice president of single-family pricing, risk transfer and
securitization for Freddie Mac.
Kevin Palmer, vice president of single-family strategic credit
costing and structuring for Freddie Mac, added, "We are developing
multiple avenues for sharing mortgage credit risk with a diverse
spectrum of private investors. We now do this through our STACR
debt notes and through global reinsurers who cover a portion of the
risk on the loans in the reference pools associated with each STACR
offering. Yesterday, several representatives from global reinsurers
spent the day at Freddie Mac to learn how we manage our
single-family business risk, and our loan servicing and quality
control processes."
Pricing for the Series 2014-DN2 M-1 class was one-month LIBOR
plus a spread of 85 basis points. Pricing for the M-2 class was one
month LIBOR plus a spread of 165 basis points. Pricing for the M-3
class was one month LIBOR plus a spread of 360 basis points. The
offering was oversubscribed and is scheduled to settle on or around
April 9, 2014.
The Series 2014-DN2, M-1 class has 3.5% subordination and
received investment grade ratings of A from both Fitch and Kroll,
subject to ongoing monitoring. The M-2 class has 2% subordination
and received investment grade ratings of BBB- from Fitch and BBB by
Kroll, subject to ongoing monitoring. The M-3 class was not rated
and has .30% subordination. The three classes have an exchangeable
feature giving investors the option to either combine pro-rata
portions of the cash flows from the M-1, M-2 and M-3 classes or
strip off a portion of the interest from any class to create bonds
with different margins.
For Series 2014-DN2, the amount of periodic principal and
ultimate principal paid by Freddie Mac is determined by the
performance of a very large and diversified reference pool of more
than 116,000 residential loans, representing an unpaid principal
balance of approximately $28.5 billion. This pool consists of a
subset of 30-year fixed-rate single-family mortgages acquired by
Freddie Mac in the third quarter of 2013. Freddie Mac holds the
senior risk and the first loss risk in reference pool, and a
portion of the risk in the M-1, M-2 and M-3 classes.
STACR Debt Notes, Series 2014-DN2, were offered to the market by
Morgan Stanley and NOMURA as co-lead managers and joint
bookrunners. Bank of America Merrill Lynch, Citigroup and RBS
served as co-managers, and Great Pacific Securities as a selling
group member.
This announcement is not an offer to sell any Freddie Mac
securities. Offers for any given security are made only through
applicable offering circulars and related supplements, which
incorporate Freddie Mac's Annual Report on Form 10-K for the year
ended December 31, 2013, filed with the Securities and Exchange
Commission ("SEC") on February 27, 2014; all other reports Freddie
Mac filed with the SEC pursuant to Section 13(a) of the Securities
Exchange Act of 1934 ("Exchange Act") since December 31, 2013,
excluding any information "furnished" to the SEC on Form 8-K; and
all documents that Freddie Mac files with the SEC pursuant to
Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any
information "furnished" to the SEC on Form 8-K.
Freddie Mac's press releases sometimes contain forward-looking
statements. A description of factors that could cause actual
results to differ materially from the expectations expressed in
these and other forward-looking statements can be found in the
company's Annual Report on Form 10-K for the year ended December
31, 2013, and its reports on Form 10-Q and Form 8-K, filed with the
SEC and available on the Investor Relations page of the company's
Web site at www.FreddieMac.com/investors and the SEC's Web site at
www.sec.gov.
Freddie Mac was established by Congress in 1970 to provide
liquidity, stability and affordability to the nation's residential
mortgage markets. Freddie Mac supports communities across the
nation by providing mortgage capital to lenders. Today Freddie Mac
is making home possible for one in four home borrowers and is one
of the largest sources of financing for multifamily housing.
Additional information is available at FreddieMac.com, Twitter
@FreddieMac and Freddie Mac's blog FreddieMac.com/blog.
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