Freddie Mac 2010 Annual Report Download - page 239

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 2010, 2009, and 2008 at the direction of the Conservator
were $5.7 billion, $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: (a) 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 (b) 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: (a) accrued and unpaid dividends previously added to the liquidation preference
and not previously paid down; and (b) 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
whole or in part. If, after termination of Treasury’s funding commitment, we pay down the liquidation preference of each
outstanding share of senior preferred stock in full, the shares will be deemed to have been redeemed as of the payment date.
Table 13.1 provides a summary of our senior preferred stock outstanding at December 31, 2010.
Table 13.1 — Senior Preferred Stock
Draw Date
Shares
Authorized
Shares
Outstanding
Total Par
Value
Initial
Liquidation
Preference
Price per Share
Total
Liquidation
Preference
(1)
Redeemable
On or After
(2)
(in millions, except initial liquidation preference price per share)
Senior preferred stock:
(3)
10% . . . . . . . . . . . . . . . . . . . . . . . September 8, 2008
(4)
1.00 1.00 $1.00 $1,000 $ 1,000 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . November 24, 2008 — — — N/A 13,800 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . March 31, 2009 — — — N/A 30,800 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . June 30, 2009 — — — N/A 6,100 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . June 30, 2010 — — — N/A 10,600 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . September 30, 2010 — — — N/A 1,800 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . . . . December 30, 2010 — — — N/A 100 N/A
Total, senior preferred stock . . . . . 1.00 1.00 $1.00 $64,200
(1) Amounts stated at redemption value.
(2) In accordance with the Purchase Agreement, until the senior preferred stock is repaid or redeemed in full, we may not, without the prior written
consent of Treasury, redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the senior preferred stock or warrant).
(3) Dividends on the senior preferred stock are cumulative, and the dividend rate is 10% per year. However, 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, the dividend rate will be 12% per year.
(4) We did not receive any cash proceeds from Treasury as a result of issuing the initial liquidation preference.
(5) Represents an increase in the liquidation preference of our senior preferred stock due to the receipt of funds from Treasury.
We received $10.6 billion in June 2010, $1.8 billion in September 2010, and $100 million in December 2010 pursuant
to draw requests that FHFA submitted to Treasury on our behalf to address the deficits in our net worth as of March 31,
2010, June 30, 2010, and September 30, 2010, respectively. In addition, we had a deficit in net worth of $401 million as of
236 Freddie Mac