Freddie Mac 2015 Annual Report Download - page 276

Financial Statements Notes to the Consolidated Financial Statements | Note 10
Freddie Mac 2015 Form 10-K 274
SENIOR PREFERRED STOCK
Pursuant to the Purchase Agreement described in Note 2, we issued one million shares of senior
preferred stock to Treasury on September 8, 2008, in partial consideration of Treasury’s commitment to
provide funds to us.
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. As discussed in Note 2, the quarterly
commitment fee has been suspended.
Treasury, as the holder of the senior preferred stock, is entitled to receive quarterly cash dividends, when,
as and if declared by our Board of Directors. The dividends we have paid to Treasury on the senior
preferred stock have been declared by, and paid at the direction of, the Conservator, acting as successor
to the rights, titles, powers and privileges of the Board. The dividend is presented in the period in which it
is determinable for the senior preferred stock, as a reduction to net income (loss) available to common
stockholders and net income (loss) per common share. The dividend is declared and paid in the following
period and recorded as a reduction to equity in the period declared. Total dividends paid in cash during
2015, 2014, and 2013 at the direction of the Conservator were $5.5 billion, $19.6 billion, and $47.6 billion,
respectively. See Note 2 for a discussion of our net worth sweep dividend.
The senior preferred stock is senior to 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 common stock or other securities ranking junior to the senior preferred stock unless:
• 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
• 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 accrued and unpaid
dividends previously added to the liquidation preference and not previously paid down and quarterly