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Freddie Mac Prices Third STACR Offering of 2015 at More Than $1 Billion

freddie-mac-twoFreddie Mac has announced the pricing of its third Structured Agency Credit Risk (STACR) debt notes offering for 2015, which has been increased up to $1.01 billion from $720 million due to market demand.

The latest offering, STACR Series 2015-DNA1, represents a couple of firsts for Freddie Mac's STACR program: it is the enterprise's first transaction in which losses will be allocated based on actual losses realized on related reference obligations instead of using a fixed severity approach to allocate losses. In addition, the latest STACR offering represents the first time the first-loss Class B tranche will be issued as book-entry notes.

Pricing for STACR Series 2015-DNA1 is as follows: for the M-1 class, one-month LIBOR (London Interbank Offered Rate) plus a spread of 90 basis points; for the M-2 class, one-month LIBOR plus a 185 basis point spread; for the M-3 class, one-month LIBOR plus a 330 basis point spread; and for the B class, one-month LIBOR plus a 920 basis point spread.

The offering is scheduled to settle on or around April 28, according to Freddie Mac. Fitch and Moody's are rating the M-1, M-2, M-3, and MACR classes, and Freddie Mac holds the senior loss risk in the reference pool as well as a portion of the risk in the M-1, M-2, and M-3 classes and first-loss Class B tranche. STACR Series 2015-DNA1 has a reference pool of single-family mortgages originated in Q4 2014 with an unpaid principal balance of more than $31.9 billion, according to Freddie Mac.

"We see actual loss-based risk transfer as more sustainable over the long run than calculated loss risk transfer deals, and we are very happy with the initial positive demand from investors," said Mike Reynolds, Freddie Mac VP of Credit Risk Transfer. "We look forward to integrating actual loss into future transactions."

The STACR offering priced earlier this week is Freddie Mac's third this year and 12th overall. Freddie Mac began the STACR program in the second half of 2013 as part of the Enterprise’s goal of reducing risk to taxpayers by increasing private capital’s role in the mortgage market. Freddie Mac has laid off a substantial portion of credit risk for more than $205 billion in unpaid balances on single-family mortgages through STACR transactions. The enterprise has issued $7.8 billion in STACR bonds to date, representing reference pools of $249.6 billion through 11 issuances, not including the current STACR Series 2015 DNA1.

Credit Suisse is acting as structuring lead manager for the transaction, and Citi Citigroup is acting as co-lead manager and joint bookrunner, according to Freddie Mac.

Click here to see a PDF of a STACR investor presentation, or click here to see more on Freddie Mac's Credit Risk Offerings.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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