Fitch Downgrades Freddie's Preferred Rating

Fitch Ratings has downgraded the preferred-stock rating of Freddie Mac from A-plus to A, while affirming the Issuer Default Ratings of the government-sponsored enterprise. The GSE's long-term IDR was affirmed at AAA, and its short-term IDR was affirmed at F1-plus. Noting that the actions followed Freddie's announcement of a $972 million net loss for the first half, Fitch attributed the downgrade to a greater likelihood that Freddie will eliminate dividends on preferred stock as housing prices decline. It also speculated that the GSE's expected capital raise "may meet market resistance" and that the way the issue is structured (between preferred and common stock) may affect Freddie's preferred-stock ratings. Fitch can be found on the Web at http://www.fitchratings.com.