Investments

Freddie MacÕ second actual loss STACR deal prices wide

Previous deal upsized due to market demand

After market demand caused Freddie Mac to increase the size of its first Structured Agency Credit Risk series offering featuring actual loss positions, Freddie Mac announced the pricing of its second actual loss STACR deal, with STACR Series 2015-DNA2 pricing wide compared to STACR Series 2015-DNA1.

According to Freddie Mac, STACR Series 2015-DNA2 featured debt notes of $950 million.

In April, STACR Series 2015-DNA1 was upsized from $720 million to $1.01 billion due to market demand. The pricing for STACR Series 2015-DNA1 was:

  • M-1 class priced at one-month LIBOR plus a spread of 90 basis points
  • M-2 class priced at one month LIBOR plus a spread of 185 basis points
  • M-3 class priced at one month LIBOR plus a spread of 330 basis points
  • B class priced at one month LIBOR plus a spread of 920 basis points

STACR Series 2015-DNA2 priced wide, with the deal pricing at:

  • M-1 class priced at one-month LIBOR plus a spread of 115 basis points
  • M-2 class priced at one month LIBOR plus a spread of 260 basis points
  • M-3 class priced at one month LIBOR plus a spread of 390 basis points
  • B class priced at one month LIBOR plus a spread of 755 basis points

STACR Series 2015-DNA2 offering was Freddie Mac’s second transaction where losses will be allocated based on the actual losses realized on the related reference obligations instead of allocating losses using a fixed severity approach.

STACR Series 2015-DNA2 has a reference pool of single-family mortgages originated from August through November 2014 with an unpaid principal balance of more than $31.9 billion, Freddie Mac said.

"DNA2 ends a great first half of 2015 for STACR," said Mike Reynolds, Freddie Mac vice president of credit risk transfer. "We've issued over $4 billion of STACR bonds this year, up from just under $2 billion in the first half of 2014. Our current estimate is to issue another $2.5 to $4 billion by the end of the year."

Under the deal’s structure, Freddie Mac holds the senior loss risk in the reference pool, and a portion of the risk in the Class M-1, M-2, M-3 and the first loss Class B tranche.

Merrill LynchPierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC served as co-lead managers and joint bookrunners, Freddie Mac said. Deutsche Bank Securities Inc. and Jefferies LLC were co-managers, and Great Pacific Securities was a selling group member.

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