[1]Freddie Mac [2] has announced [3] on Tuesday the pricing of its fourth Structured Agency Credit Risk (STACR [4]) debt notes offering for 2015 at $425.6 million, pending market conditions.
With the latest offering, STACR Series 2015-HQ2, Freddie Mac is rating the M-3 bond and issuing 100 basis points of first loss. Freddie Mac holds the senior loss risk in the capital structure and also holds a portion of the risk in the Class M-1, M-2, and M-3, and the first-loss Class B tranche. STACR HQ2 is fixed severity, not actual loss.
STACR Series 2015 HQ-2 consists of a reference pool of single-family mortgages with an unpaid principal balance of more than $30.3 billion. The mortgages in the reference pool were acquired by Freddie Mac from the first through third quarters in 2013 and have loan-to-value ratios ranging from 80 to 95 percent. The loans in the pool are 30-year fixed-rate single-family mortgage loans.
"This is our fourth STACR offering out of an expected six to eight this year," said Mike Reynolds, Freddie Mac vice president of Credit Risk Transfer. "STACR has gained momentum in the market so far this year, and we hope to continue to see new investor participation in each transaction."
Co-lead managers and joint bookrunners for the STACR offering will be Barclays and Nomura. Co-managers will be BNP Paribas and Morgan Stanley. Multi-Bank Securities will be a group selling member for the deal.
The issuance of STACR Series 2015-HQ2 comes one month after Freddie Mac announced its intention to sell its third STACR debt notes offering, STACR Series 2015-DNA1, at $1.01 billion (an increase from $720 million due to market demand). That STACR offering represented a couple of first for Freddie Mac: It was 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, that STACR offering represented the first time the first-loss Class B tranche will be issued as book-entry notes.
The STACR offering priced on Tuesday is the GSE’s fourth this year and 13th 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 $266 billion in unpaid balances on single-family mortgages through STACR transactions, according to the GSE. The enterprise has issued $8.8 billion in STACR bonds to date, representing reference pools of $292.6 billion through 13 issuances.