S&P Downgrades Certain Freddie Ratings

Standard & Poor's Ratings Services has downgraded its subordinated debt and preferred stock ratings on Freddie Mac from AA-minus to A-minus and its risk-to-the government rating from AA-minus to A. S&P also affirmed its senior unsecured debt rating of AAA/Stable/A-1-plus on Freddie Mac. The ratings were removed from CreditWatch Negative, but the outlook is negative. "The lower risk-to-the-government, subordinated debt, and preferred stock ratings reflect Freddie Mac's pressured capital position in the face of higher operating losses," said S&P credit analyst Victoria Wagner. "....Higher credit expenses are the driver of net operating losses, as Freddie Mac is not immune to the weak housing markets." The lower subordinated debt and preferred stock ratings reflect "heightened subordination risk," S&P said, noting that recent housing legislation creates a new regulatory structure with receivership powers that would place nonsenior creditors at a greater risk of nonpayment, especially on preferred stock dividends.