Amount: $1bn Freddie SUBS
Maturity: November 5, 2012
Issue price: 99.769
Coupon: 5.25%
Spread at launch: 130bp over the 4.375% August 2012 UST
Call option: at par on 05/11/07
Launched: Wednesday October 30
Joint books: Citigroup/SSB, Credit Suisse First Boston, Lehman Brothers
Bookrunners' comments:
CSFB - The vast majority of paper was distributed into the US. Freddie does not release any aggregate statistics on the demand profile, but from our experience the majority is domestic.
There was heavy participation from insurance companies, states and municipalities and money managers. You typically get the traditional agency buyer base, but we also see corporate bond investors, attracted by the relatively wide spread for such a stable and strong credit quality.
The bonds performed well in the aftermarket, outperforming Treasuries by 0.5bp and swaps by 2bp on the day.
Lehman - The SUBS deal came out at 130bp over the 10 year and closed (Thursday) at 129.5bp-128.5bp, so it has traded extremely well even with the rally in the Treasury market.
Market appraisal:
"...it is hard to determine what was accomplished here.
Freddie made a representation to Congress that it would issue subordinated debt as an early warning mechanism, something that would reflect the market's assessment of its credit risk.
Fannie Mae has been dutifully issuing bullets, but Freddie Mac has been issuing callables, which seems to defeat the object.
They tell you virtually nothing."
