Freddie Mac's 2011 K Deals Double Those of Last Year

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Earlier this month, a new offering of structured pass-through securities, or "K certificates," was announced by McLean, Va.-based Freddie Mac.

By Jeffrey Steele, Contributing Writer

McLean, Va.—Earlier this month, a new offering of structured pass-through securities, or “K certificates,” was announced by McLean, Va.-based Freddie Mac. The company announced approximately $1 billion in “K-016 certificates” would be offered, and that they would price in early December and settle on or about Dec. 22.

K certificates give Freddie Mac an efficient vehicle to securitize multifamily loans. Backed by 85 recently originated multifamily mortgages, the K-016 certificates feature a Freddie Mac guarantee. Investors in the K certificates gain stable cash flows as well as structured credit enhancement, in addition to the guarantee.

A syndicate of dealers headed by Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, acting as co-lead managers and joint bookrunners for the transaction, is offering the K-016 certificates. Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are co-managers for the transaction.

“We issued our first K deal in 2009, [and] we doubled the number of K deals in 2011, compared to 2010,” Patti Boerger, Freddie Mac public relations director, tells MHN. She reports that 2009 witnessed two offerings totaling $2.1 billion, a number that increased to six offerings totaling $6.5 billion in 2010. The 12 offerings issued thus far this year have totaled almost $14 billion, Boerger says.

“We are one of the primary organizations keeping the CMBS market active with our K deal offerings,” she adds. “Industry CMBS issuance is about $30 billion.”

The K-016 certificates are comprised of two classes of senior principal and interest classes, a senior interest-only class and a junior interest-only class. Ratings agencies Fitch, Inc. and Morningstar Credit Ratings, LLC were engaged to rate the three senior classes of K-016 certificates.

A Freddie Mac multifamily investor presentation on the K-deal structure and multifamily loan portfolio performance data can be found at freddiemac.com.

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