Freddie's Debt Spread Raises New Questions

The pricing of Freddie Mac's latest Reference Notes offering at 113 basis points over comparable Treasury obligations -- the highest spread the company has ever paid on such debt -- raises new questions about its ability to raise short-term money at a reasonable cost as it struggles with massive delinquencies. Meanwhile, speculators are shorting its stock, believing that the Treasury Department may have to buy its shares, which could dilute the value of its common stock even further. Freddie hopes to raise $5.5 billion in new capital over the coming weeks but has yet to offer any guidance on how it will do so. Company chairman and chief executive Richard Syron recently said the government-sponsored enterprise will likely sell both common and preferred stock. He admitted that to attract investors to the preferred shares, the company would have to offer a double-digit yield.