Freddie Mac 2011 Annual Report Download - page 272

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.
The table below provides a summary of our senior preferred stock outstanding at December 31, 2011.
Table 12.1 — 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
10%
(5)
. . . . . . . . . . . . . . . . . . . March 31, 2011 — — — N/A 500 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . September 30, 2011 — — — N/A 1,479 N/A
10%
(5)
. . . . . . . . . . . . . . . . . . . December 30, 2011 — — — N/A 5,992 N/A
Total, senior preferred stock . . . 1.00 1.00 $1.00 $72,171
(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 $500 million in March 2011, $1.5 billion in September 2011, and $6.0 billion in December 2011
pursuant to draw requests that FHFA submitted to Treasury on our behalf to address the deficits in our net worth as of
December 31, 2010, June 30, 2011, and September 30, 2011, respectively. In addition, we had a deficit in net worth of
$146 million as of December 31, 2011. See “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS —
Government Support for our Business” for additional information regarding the draw request that FHFA, as Conservator,
will submit on our behalf to Treasury to address our deficit in net worth. The aggregate liquidation preference on the
senior preferred stock owned by Treasury was $72.2 billion and $64.2 billion as of December 31, 2011 and December 31,
2010, respectively. See “NOTE 15: REGULATORY CAPITAL” for additional information.
267 Freddie Mac