Freddie Mac 2011 Annual Report Download - page 84

significantly undercapitalized or critically undercapitalized. If FHFA classifies us as significantly undercapitalized,
approval of the Director of FHFA is required for any dividend payment; the Director may approve a capital distribution
only if the Director determines that the distribution will enhance the ability of the company to meet required capital levels
promptly, will contribute to the long-term financial safety-and-soundness of the company, or is otherwise in the public
interest. Our capital requirements have been suspended during conservatorship.
Restrictions Under our Charter
Without regard to our capital classification, we must obtain prior written approval of FHFA to make any capital
distribution that would decrease total capital to an amount less than the risk-based capital level or that would decrease
core capital to an amount less than the minimum capital level. As noted above, our capital requirements have been
suspended during conservatorship.
Restrictions Relating to Subordinated Debt
During any period in which we defer payment of interest on qualifying subordinated debt, we may not declare or pay
dividends on, or redeem, purchase or acquire, our common stock or preferred stock. Our qualifying subordinated debt
provides for the deferral of the payment of interest for up to five years if either: (a) our core capital is below 125% of our
critical capital requirement; or (b) our core capital is below our statutory minimum capital requirement, and the Secretary
of the Treasury, acting on our request, exercises his or her discretionary authority pursuant to Section 306(c) of our
charter to purchase our debt obligations. FHFA has directed us 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specified capital levels, are no longer applicable. As noted above, our capital requirements have been suspended during
conservatorship.
Restrictions Relating to Preferred Stock
Payment of dividends on our common stock is also subject to the prior payment of dividends on our 24 series of
preferred stock and one series of senior preferred stock, representing an aggregate of 464,170,000 shares and
1,000,000 shares, respectively, outstanding as of December 31, 2011. Payment of dividends on all outstanding preferred
stock, other than the senior preferred stock, is subject to the prior payment of dividends on the senior preferred stock. We
paid dividends on the senior preferred stock during 2011 at the direction of the Conservator, as discussed in “MD&A —
LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Dividend Obligation on the Senior Preferred Stock” and
“NOTE 12: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT) — Dividends Declared During 2011.” We did not
declare or pay dividends on any other series of preferred stock outstanding in 2011.
Recent Sales of Unregistered Securities
The securities we issue are “exempted securities” under the Securities Act of 1933, as amended. As a result, we do
not file registration statements with the SEC with respect to offerings of our securities.
Following our entry into conservatorship, we suspended the operation of, and ceased making grants under, equity
compensation plans. Previously, we had provided equity compensation under these plans to employees and members of
our Board of Directors. Under the Purchase Agreement, we cannot issue any new options, rights to purchase,
participations, or other equity interests without Treasury’s prior approval. However, grants outstanding as of the date of
the Purchase Agreement remain in effect in accordance with their terms.
No stock options were exercised during the three months ended December 31, 2011. However, restrictions lapsed on
10,729 restricted stock units.
See “NOTE 12: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT)” for more information.
Issuer Purchases of Equity Securities
We did not repurchase any of our common or preferred stock during the three months ended December 31, 2011.
Additionally, we do not currently have any outstanding authorizations to repurchase common or preferred stock. Under the
Purchase Agreement, we cannot repurchase our common or preferred stock without Treasury’s prior consent, and we may
only purchase or redeem the senior preferred stock in certain limited circumstances set forth in the Certificate of Creation,
79 Freddie Mac