Freddie Launches Largest-Ever Issue Of $10 Billion, 3-Year Note
18 Februar 2009 - 5:18PM
Dow Jones News
Mortgage giant Freddie Mac (FRE) launched its largest-ever debt
issue of $10 billion in three-year notes Wednesday.
This may be the latest testament to investors' icnreasing
confidence of the government's support extended to Freddie and its
sibling Fannie Mae (FNM), both of which were put under
conservatorship by its regulator last September.
The mortgage-finance company seems to be well past the days when
buyers demanded higher premiums on debt due to mounting concerns
about its capital, and whether the extent of government backing
would be enough to pull the mortgage finance companies through the
housing crisis.
"Investors are becoming more comfortable with the reality of the
GSEs' relationship with the government," said Margaret Kerins, head
of agency strategy at RBS Greenwich.
In addition, the announcement on Wednesday of the U.S. Treasury
Department's increase of its preferred stock purchase agreement to
$200 billion from $100 billion bound the two companies closer to
the government, she said. The measure is expected to ensure the
companies' net worth stayed positive despite expected losses in the
next few quarters.
This relationship may be further cemented if the Office of
Management and Budget decides to move Fannie and Freddie onto the
federal budget at the end of this month.
Debt-market investors are factoring in this potential
"nationalization" as they flock to Freddie's current issue.
This week's issue was launched with a price guidance of 88 basis
points over comparable 3-year Treasury yields. The deal is expected
to price Wednesday, and settle Thursday. Currently, risk premiums
on Fannie's 2% three-year note is tighter by 5 basis points at 67
basis points over comparable Treasury yields, according to TradeWeb
data.
The lead managers on the deal are J.P. Morgan Chase, Morgan
Stanley and UBS Investment Bank.
This three-year note is Freddie's second foray into the debt
markets this year. Previously, it raised $3.5 billion of five-year
and $3 billion of two-year securities in January. These capital
raises would allow the mortgage company to continue guaranteeing
and buying mortgage bonds.
-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071;
prabha.natarajan@dowjones.com