Kroll Bond Ratings Agency and Fitch plan to assign investment grade ratings to the M1 and M2 notes of Freddie Mac's latest risk sharing transaction.
KBRA expects to rate the $966 million Structured Agency Credit Risk deal's M1 notes A and the M2 notes of BBB. Fitch has assigned preliminary Asf and BBB-sf ratings to the deal, STACR 2014-DN2. (BBB- is generally considered the lowest investment-grade rating.) The structure also will issue M3 notes that the ratings agencies will leave unrated.
Freddie Mac’s February deal, STACR 2014-DN1, also offered three tranches (M1, M2 and M3) with different levels of credit support.
The $28.1 billion reference pool of 116,677 mortgages has a weighted average Fair Isaac & Co. credit score of 760, a WA loan-to-value of 75%, and a WA combined loan-to-value of 76%. The class M1 and M2 notes offer credit enhancement of 2.00%; the class M3 notes offer credit enhancement of 0.30%.
Morgan Stanley and Nomura Securities are the co-lead managers on the transaction.
— Bonnie Sinnock contributed to this report