Freddie Cuts Dividend, Announces $6 Billion Preferred Offering

Freddie Mac said late Tuesday that it will cut its common dividend by 50 percent, to $0.25 per share, while it will sell $6 billion in preferred stock as part of a move to raise capital amid expected mortgage-related losses in the fourth quarter.

Today’s move was largely anticipated. The GSE reported a $2 billion loss for the third quarter on November 20th, and had said at that time that it would seek to raise capital to provide operating flexibility for 2008.

“Freddie Mac is announcing today a proactive capital management plan that will help us meet the 30 percent surplus and address regulatory concerns and GAAP accounting requirements, provide sufficient capital to continue fulfilling our important housing mission through the current market environment, and better position us to effectively manage the company going forward,” said chairman and CEO Richard F. Syron.

Freddie Mac’s estimated regulatory core capital of $34.6 billion at September 30, 2007 represented an estimated cushion of $8.5 billion in excess of the company’s regulatory minimum capital requirement, and an estimated surplus of $0.6 billion in excess of the 30 percent mandatory target capital surplus imposed on the company by the Office of Housing Enterprise Oversight.

Rajiv Setia, a strategist at Barclays Capital in New York, was quoted by Reuters news agency as saying Freddie’s plan was a “first step,” while suggesting that more may be needed.

“What this does is really protect them for the next few quarters from any adverse marks to their portfolio,” Setia is quoted as saying.

For more information, visit http://www.freddiemac.com.