Freddie Mac seen raising funds after Fannie Mae deal

By Julie Haviv

NEW YORK (Reuters) - Freddie Mac (FRE.N), the second-largest U.S. home funding company, may copy Fannie Mae's (FNM.N) recent multibillion dollar capital raising after reporting its own results next week.

Freddie Mac on Wednesday is expected to report a loss in its first-quarter results, a week after Fannie Mae divulged a bigger-than-expected net loss of $2.51 billion for the same period.

Fannie Mae sold $2.25 billion in convertible preferred stock as well as $2.25 billion of common stock this week to shore up its balance sheet, as it grapples with the worst U.S. housing market downturn since the Great Depression.

Fresh on the heels of those well-received offerings, Freddie Mac may announce a similar sale, investors said.

"It would be reasonable to expect that Freddie Mac will look to raise capital next week," said Moshe Orenbuch, equity research managing director at Credit Suisse in New York.

Freddie Mac will look to raise between $4 billion and $5 billion if the McLean, Virginia-based company does not have to take the write-downs on their asset-backed securities portfolio, Orenbuch said.

"It could be higher than that if they did," adding between $3 billion and $5 billion, he added.

Even so, demand for Freddie Mac's won't be dampened by Fannie Mae's offerings.

"You are not just getting a little yield from Fannie Mae and Freddie Mac -- but a lot," said Andrew Harding, chief investment officer for fixed-income at Allegiant Asset Management in Cleveland, Ohio.

Washington D.C.-based Fannie Mae still may have more to sell as well, and is expected to tap financial markets again next week with at least $1.5 billion of preferred stock as part of an overall plan to raise $6 billion.

Before this week's sale, Fannie Mae raised a record $7 billion in capital in December, paying a fixed dividend of 8.25 percent for three years. Freddie Mac in November sold $6 billion in preferred stock at an 8.375 percent dividend for five years.

"We feel that these securities are some of the most attractive in the debt markets because you are getting very high yields with nice upside potential," Harding added.

Michael Cosgrove, spokesman for Freddie Mac, declined to comment on any capital raising plans set for next week.

The regulator of Fannie Mae and Freddie Mac, the Office of Federal Housing Enterprise Oversight, in mid-March loosened restrictions on how much capital the two companies must hold.

This frees Fannie Mae and Freddie Mac to expand their mortgage purchases by up to a combined $200 billion, in an effort to help stabilize the housing turmoil.