Fannie Mae to Sell Stock, Cut Dividend

December 4, 2007 No Comments »

Mortgage financier Fannie Mae said late Tuesday that it plans to issue $7 billion of preferred stock and slash its dividend in a move to raise capital amid the ongoing mortgage crisis.

“Fannie Mae has a responsibility to serve the mortgage market in good times and in times like these,” said Daniel H. Mudd, President and Chief Executive Officer.

“The steps we are taking today are designed to enable us to meet that responsibility with a comprehensive, conservative plan to serve the market and manage our capital. The market needs us to be there – and we believe this plan will help us do that.”

Fannie Mae, which reported a third-quarter loss of $1.4 billion, said the stock sale will provide additional funds to help the company navigate the riskier lending environment, while freeing up capital to “pursue attractive investment opportunities.”

The preferred stock will not be convertible into common stock, and is in addition to the $500 million in preferred stock Fannie Mae raised last month.

The government-sponsored entity said the decision to sell preferred stock came as capital market conditions improved, citing unidentified transactions.

“Several large transactions with relatively attractive terms have been completed since we issued our $500 million of preferred stock in November,” said David C. Benson, Fannie Mae Senior Vice President and Treasurer.

“We believe we can move quickly with a sizable offering at this time.”

The company’s Board of Directors also intends to slash the company’s quarterly common stock dividend by 30 percent from $0.50 to $0.35 per share starting in the first quarter of 2008.

Two weeks ago, fellow financier Freddie Mac revealed plans to sell $6 billion of preferred stock, their largest-ever preferred issue, after reporting a $2 billion third-quarter loss.

Shares of Fannie Mae ended the regular trading session down $1.07, or 2.95%, to $35.18, and fell another 87 cents in after hours trading.

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