Freddie Mac 2009 Annual Report Download - page 267

eliminates daylight overdrafts by GSEs. At December 31, 2009 and 2008, we had one and two secured, uncommitted lines of
credit totaling $10 billion and $17 billion, respectively. No amounts were drawn on these lines of credit at December 31,
2009 or 2008. We expect to continue to use the current facility from time to time to satisfy our intraday financing needs;
however, since the line is uncommitted, we may not be able to draw on it if and when needed.
Lending Agreement
On September 18, 2008, we entered into the Lending Agreement with Treasury under which we could request loans,
however the Lending Agreement expired on December 31, 2009. No amounts were borrowed under the Lending Agreement.
Subordinated Debt Interest and Principal Payments
In a September 23, 2008 statement concerning the conservatorship, the Director of FHFA stated that we would continue
to make interest and principal payments on our subordinated debt, even if we fail to maintain required capital levels. As a
result, the terms of any of our subordinated debt that provide for us to defer payments of interest under certain
circumstances, including our failure to maintain specified capital levels, are no longer applicable.
NOTE 10: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT)
Issuance of Senior Preferred Stock
Pursuant to the Purchase Agreement described in ‘NOTE 2: CONSERVATORSHIP AND RELATED
DEVELOPMENTS,” we issued one million shares of senior preferred stock to Treasury on September 8, 2008. The senior
preferred stock was issued to Treasury in partial consideration of Treasury’s commitment to provide funds to us under the
terms set forth in the Purchase Agreement.
Shares of the senior preferred stock have a par value of $1, and have a stated value and initial liquidation preference
equal to $1,000 per share. The liquidation preference of the senior preferred stock is subject to adjustment. Dividends that
are not paid in cash for any dividend period will accrue and be added to the liquidation preference of the senior preferred
stock. In addition, any amounts Treasury pays to us pursuant to its funding commitment under the Purchase Agreement and
any quarterly commitment fees that are not paid in cash to Treasury nor waived by Treasury will be added to the liquidation
preference of the senior preferred stock. As described below, we may make payments to reduce the liquidation preference of
the senior preferred stock in limited circumstances.
Treasury, as the holder of the senior preferred stock, is entitled to receive, when, as and if declared by our Board of
Directors, cumulative quarterly cash dividends at the annual rate of 10% per year on the then-current liquidation preference
of the senior preferred stock. Total dividends paid in cash during 2009 and 2008 at the direction of the Conservator were
$4.1 billion and $172 million, respectively. If at any time we fail to pay cash dividends in a timely manner, then
immediately following such failure and for all dividend periods thereafter until the dividend period following the date on
which we have paid in cash full cumulative dividends (including any unpaid dividends added to the liquidation preference),
the dividend rate will be 12% per year.
The senior preferred stock ranks ahead of our common stock and all other outstanding series of our preferred stock, as
well as any capital stock we issue in the future, as to both dividends and rights upon liquidation. The senior preferred stock
provides that we may not, at any time, declare or pay dividends on, make distributions with respect to, or redeem, purchase
or acquire, or make a liquidation payment with respect to, any Freddie Mac common stock or other securities ranking junior
to the senior preferred stock unless: (1) full cumulative dividends on the outstanding senior preferred stock (including any
unpaid dividends added to the liquidation preference) have been declared and paid in cash; and (2) all amounts required to
be paid with the net proceeds of any issuance of capital stock for cash (as described in the following paragraph) have been
paid in cash. Shares of the senior preferred stock are not convertible. Shares of the senior preferred stock have no general or
special voting rights, other than those set forth in the certificate of designation for the senior preferred stock or otherwise
required by law. The consent of holders of at least two-thirds of all outstanding shares of senior preferred stock is generally
required to amend the terms of the senior preferred stock or to create any class or series of stock that ranks prior to or on
parity with the senior preferred stock.
We are not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment
set forth in the Purchase Agreement; however, we are permitted to pay down the liquidation preference of the outstanding
shares of senior preferred stock to the extent of (i) accrued and unpaid dividends previously added to the liquidation
preference and not previously paid down; and (ii) quarterly commitment fees previously added to the liquidation preference
and not previously paid down. In addition, if we issue any shares of capital stock for cash while the senior preferred stock is
outstanding, the net proceeds of the issuance must be used to pay down the liquidation preference of the senior preferred
stock; however, the liquidation preference of each share of senior preferred stock may not be paid down below $1,000 per
share prior to the termination of Treasury’s funding commitment. Following the termination of Treasury’s funding
commitment, we may pay down the liquidation preference of all outstanding shares of senior preferred stock at any time, in
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