Freddie Mac Prices $986 Million Multifamily K-Deal, K-F86

Rhea-AI Summary

Freddie Mac (OTCQB: FMCC) has announced the pricing of approximately $986 million in Structured Pass-Through Certificates, known as K-F86 Certificates, set to settle around October 13, 2020. These certificates include classes of senior bonds indexed to both LIBOR and SOFR, backed by floating-rate multifamily mortgages. The offering aims to provide investors with stable cash flows while transferring some risk from taxpayers to private investors. The K Certificates do not carry a rating but will feature a basis risk guarantee from Freddie Mac.

Positive

• Approximately $986 million in K Certificates priced, offering potential stable cash flows.
• Includes classes of bonds indexed to SOFR and LIBOR, providing alternative investment vehicles.
• Freddie Mac's guarantee on Class AS enhances investor security against interest rate basis risk.

Negative

• None.

MCLEAN, Va., Oct. 02, 2020 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) has priced a new offering of Structured Pass-Through Certificates (K Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The approximately $986 million in K Certificates (K-F86 Certificates) are expected to settle on or about October 13, 2020. The K-F86 Certificates are backed by floating-rate multifamily mortgages with 7-year terms, which are currently LIBOR-based.

K-F86 includes one class (Class AL) of senior bonds indexed to LIBOR and another class (Class AS) of senior bonds indexed to SOFR. Freddie Mac will provide a basis risk guarantee on Class AS that covers any floating interest rate basis risk if the value of SOFR exceeds the value of LIBOR.

K-F86 Pricing

Class	Principal/Notional Amount (mm)		Weighted Average Life (Years)	Discount Margin	Coupon	Dollar Price
AL	$536.049		6.47	29	1 mo LIBOR + 29	100.000
AS	$450.000		6.47	32	30-day SOFR avg + 32	100.000
X	Non-Offered

Details

• Co-Lead Managers and Joint Bookrunners: Goldman Sachs & Co. LLC and BofA Securities, Inc.
• Co-Managers: CastleOak Securities, L.P., Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and PNC Capital Markets LLC

Related Links

• The K-F86 preliminary offering circular supplement: http://www.freddiemac.com/mbs/data/kf86oc.pdf
• Freddie Mac Multifamily Securitization Overview
• Multifamily Securities Investor Access database of post-securitization data from Investor Reporting Packages
  

The K-F86 Certificates will not be rated, and will include two senior principal and interest classes and one interest-only class that is also entitled to static prepayment premiums. The K-F86 Certificates are backed by corresponding classes issued by the FREMF 2020-KF86 Mortgage Trust (KF86 Trust) and guaranteed by Freddie Mac. The KF86 Trust will also issue certificates consisting of the Class C and R Certificates, which will be subordinate to the classes backing the K-F86 Certificates and will not be guaranteed by Freddie Mac.

Freddie Mac Multifamily is a leading issuer of agency-guaranteed structured multifamily securities. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (SEC) on February 13, 2020; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2019, excluding any information "furnished" to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information “furnished” to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments and estimates, and various factors could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements. These assumptions, judgments, estimates and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2019, and its reports on Form 10-Q and Form 8-K, which are available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this press release. The multifamily investors section of the company’s Web site at https://mf.freddiemac.com/investors/ will also be updated, from time to time, with any information on material developments or other events that may be important to investors, and we encourage investors to access this website on a regular basis for such updated information.

The financial and other information contained in the documents that may be accessed on this page speaks only as of the date of those documents. The information could be out of date and no longer accurate. Freddie Mac undertakes no obligation, and disclaims any duty, to update any of the information in those documents.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we've made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.

MEDIA CONTACT: Michael Morosi
(703) 918-5851
Michael_Morosi@FreddieMac.com
INVESTOR CONTACTS: Robert Koontz
571-382-4082
Amanda Nunnink
312-407-7510

FAQ

What are K-F86 Certificates from Freddie Mac?

K-F86 Certificates are structured pass-through securities priced at $986 million, backed by floating-rate multifamily mortgages.

When will the K-F86 Certificates settle?

The K-F86 Certificates are expected to settle on or about October 13, 2020.

What types of bonds are included in the K-F86 offering?

The K-F86 offering includes senior bonds indexed to LIBOR and SOFR.

What is the significance of the basis risk guarantee for Class AS?

The basis risk guarantee covers any floating interest rate basis risk if SOFR exceeds LIBOR, enhancing investor security.

Are the K-F86 Certificates rated?

No, the K-F86 Certificates will not be rated.