Housing Bubble
Fannie Mae announces foreign currency debt issuance vehicle
March 11, 2003
LONDON--(BUSINESS WIRE)-- Franklin D. Raines, Chairman and Chief Executive Officer of Fannie Mae , America's largest source of financing for home mortgages, today introduced a new debt issuance vehicle that, coupled with the company's recently expanded funding desk hours, will help the company support the increasing demand for housing capital in the United States.
Speaking at a London press briefing in conjunction with the company's 19th annual debt and equity investor visit to Europe, Raines said that the demand for mortgage capital in the United States should double over the decade. To keep pace, Fannie Mae and others in the industry will need to increase the availability of mortgage financing.
"Fannie Mae's FX Discount Notes initiative is a multi-currency debt issuance vehicle for short-term debt that will help Fannie Mae support mortgage demand and enable international investors to execute transactions during their domestic trading hours and in a currency of their choice," Raines said. "Fannie Mae will issue predominantly in the euro, British pound, Swiss franc and Japanese yen, in addition to other currencies as warranted by investor demand." Raines added that the company will swap these foreign currency borrowings into U.S. dollars to help finance its mortgage portfolio, which is dollar denominated.
Linda Knight, Fannie Mae's senior vice president and treasurer, added that because Fannie Mae has the ability to bring additional liquidity to the market, international investors will appreciate the program. "While there are several issuers capable of maintaining large liquid issuance, Fannie Mae's entrance into this market should help satisfy investors' appetite for securities capable of being issued in large size and customized to the maturity date and in the currency of their choosing," she said. "The FX Discount Notes window will open for business on April 7, 2003."
Initially, the securities will be available through a small dealer group consisting of Citigroup, Credit Suisse First Boston, Deutsche Bank Securities, Goldman Sachs, J.P. Morgan and Lehman Brothers. These dealers have been selected based upon their expertise in the Euro commercial paper market and their activity in underwriting Fannie Mae short-term debt securities.
Fannie Mae also recently extended its funding desk hours to provide international investors the opportunity to execute new issue, long-term debt securities through dealer underwriters on a real-time basis more closely aligned with their own trading hours. Beginning January 27, 2003, Fannie Mae opened its funding desk at 5:00 a.m. EST, 10:00 a.m. GMT, to execute long-term debt securities transactions. Raines said that since the past month the company has executed several trades with international investors during the extended hours - a few with first-time callable buyers. More importantly, he said, the extended hours are a useful platform for education and real-time substantive discussions on callable valuations with international investors during their own trading hours.
