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.