Freddie Mac sold its second offering of notes transferring credit risk on the mortgages it insures at much lower cost than its initial offering in late June.
Pricing for the Structured Agency Credit Risk, Series 2013 DN2 M-1 class, which is rated Baa1 by Moody’s Investors Service and BBB- by Fitch Ratings, was at a spread of 145 basis points over one-month LIBOR. By comparison, a similar tranche of the deal it sold in July priced at Libor plus 340 basis points. Freddie Mac did not seek a credit rating for its initial offering.
Pricing for the unrated M-2 class of the latest offering was one month LIBOR plus a spread of 425 basis points.
Barclays Capital was co-lead manager and sole bookrunner; Morgan Stanley also served as co-lead manager. Nomura, RBS and Wells Fargo served as co-managers.
In a press release issued Tuesday, Freddie Mac said that about 50 broadly-diversified investors participated in the offering. It is scheduled to settle on Nov. 12, 2013.
"With two successful STACR offerings under our belt, we are well on our way to having a scalable offering with regular issuances,” said David Lowman, executive vice president of single-family business for the GSE. “We are pleased with the markets' acceptance of these bonds."
For the latest offering, the amount of periodic principal and ultimate principal paid by Freddie Mac is determined by the performance of reference pool of more than 145,500 residential loans, representing an unpaid principal balance of approximately $35.3 billion. This pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the first 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 and M-2 classes
Both classes of the latest offering have an exchangeable feature giving investors the option to either combine pro-rata portions of the cash flows from the M-1 and M-2 classes or to strip off a portion of the interest from either class to create bonds with different margins.
The first STACR offering, Series 2013 DN1, settled in July; Fannie Mae followed up with its inaugural offering of $675 million of risk-sharing notes in October.