Freddie Mac Thursday said it plans to issue a Mortgage-Linked Amortizing Notes security.
The transaction is comprised of senior unsecured debt obligations with cash flows that mimic referenced the principal payments of referenced agency mortgage-related securities.
The government-sponsored enterprise said the transaction is slated to price Friday and settle the following Tuesday. It is somewhat similar to some previous “reference” securities deals Freddie has done but the first issued under this name.
The mortgage-related security referenced by MLANs may be any agency mortgage-related security including a specific Freddie Mac Giant, Participation Certificate, and a combination of PCs or REMIC tranches.
Monthly payments on a MLAN will consist of principal payments and interest payments. The principal payments will be based on the monthly publicly disclosed factor of the referenced mortgage-related security, while the interest payments will accrue and be paid at a fixed rate.
MLANs will have a maturity date shorter than the stated maturity date of the referenced mortgage-related security. A MLAN security is non-callable by Freddie Mac but may be retired earlier than its maturity date if the referenced mortgage-related security repays principal at a rapid rate due to prepayments.
Goldman, Sachs Co. is offering the security with co-managers Credit Suisse and J.P. Morgan Chase.