Freddie Mac Prices First K-Deal with Bonds Indexed to SOFR

$765 Million Multifamily K-Deal, K-F73, Paves Path for LIBOR Transition

MCLEAN, Va., Dec. 12, 2019 (GLOBE NEWSWIRE) -- In an industry first, 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 $765 million in K Certificates (K-F73 Certificates) are expected to settle on or about December 20, 2019. The K-F73 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based.

Freddie Mac is using K-F73 to provide support to the SOFR bond market ahead of a SOFR multifamily mortgage offering and to help ease the eventual transition away from LIBOR. K-F73 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 guarantee on Class AS that covers any basis mismatch if the SOFR-based index exceeds the LIBOR-based index. The underlying LIBOR-based multifamily mortgages and the K-F73 bonds indexed to LIBOR will convert to an alternate index, which may be SOFR, if LIBOR ceases to be published.

“Freddie Mac Multifamily is proud to have brought to market its first multifamily real estate securitization with bonds indexed to SOFR,” said Robert Koontz, Senior Vice President of Multifamily Capital Markets. “With the successful execution of K-F73, Freddie Mac is helping to ease the transition from LIBOR to SOFR. This transaction further underscores our commitment to providing market liquidity and stability.”

K-F73 Pricing

Class	Principal/Notional Amount (mm)		Weighted Average Life (Years)	Discount Margin	Coupon	Dollar Price
AL	$565.645		9.54	60	1 mo LIBOR + 60	100.000
AS	$200.000		9.54	67	1 mo avg SOFR + 67	100.000
XI	$850.717		9.55	Non-Offered
XP	$850.717		N/A	Non-Offered

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