Mortgage firm Fannie prices $4.5 bln of securities

By Jennifer Ablan and Al Yoon

NEW YORK (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research) priced $4.5 billion of securities on Thursday to shore up the balance sheet of the biggest provider of financing for U.S. home loans as it grapples with the worst housing slump in decades.

A $2.25 billion convertible preferred offering priced at a dividend rate of 8.75 percent, Fannie said in  statement. That was at the tight end of the indicated range of 8.75 percent to 9.25 percent.

Fannie also priced $2.25 billion of common stock at $27.50 per share, the mortgage financing firm said. Fannie shares closed down 4.89 percent at $27.63 on the New York Stock Exchange on Thursday. For details of the sale click on [nWEN5626]

Having posted three consecutive quarters of losses, Fannie needs cash to meet the demands of the U.S. housing market after more than a year of soaring delinquencies and falling home prices.

Fannie had been expected to raise $4 billion in securities, market sources looking at the deal told Reuters earlier. Investors were demanding three to four times the amount on offer, the sources said, before the pricing announcement.

"When these deals come, appetite is strong and the deals get done and priced almost instantly," Michael Kastner, head of fixed income at Sterling Stamos Capital Management in New York, said before the deal. "It's a sign the credit problem is resolving itself."

Other financial institutions are also raising capital after suffering losses from the mortgage-market meltdown. Citigroup Inc (C.N: Quote, Profile, Research), the largest U.S. bank, sold $2 billion in non-cumulative perpetual preferred stock on Tuesday with a coupon of 8.5 percent.

Lawmakers and regulators have increased pressure on Fannie Mae and rival Freddie Mac (FRE.N: Quote, Profile, Research) to do more to stabilize the housing market, especially in a presidential election year.