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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Freddie Mac    FMCC

FREDDIE MAC

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Exclusive: Freddie Mac hires McKinsey to review capital with government overhaul looming

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11/07/2019 | 03:09pm EDT
Logo of McKinsey and Company is seen at VivaTech fair in Paris

Housing finance giant Freddie Mac has hired management consultancy McKinsey & Company to advise on capital management, a spokesman said Thursday, as Freddie and its regulator start the long process of overhauling the firm and ultimately removing it from government control.

"After a competitive ... process, Freddie Mac retained McKinsey to conduct a gap assessment of our capital management capabilities and develop a roadmap to address any issues. This four-month engagement will begin in December," said a Freddie Mac spokesman in a statement to Reuters.

McKinsey did not respond to requests for comment.

Hiring McKinsey is the strongest signal yet that Freddie is beginning to draw-up a long-term roadmap to overhaul its operations and raise capital as a precursor to eventually freeing itself from government conservatorship.

Freddie and its fellow government-sponsored enterprise Fannie Mae were bailed out in 2008 during the subprime mortgage crisis. While the pair have not yet gotten approval to raise outside capital, they have been urged by their regulator, the Federal Housing Finance Agency, to shore up their operations to ensure they can function as standalone companies.

The pair, which guarantee over half of the nation's mortgages, are expected to eventually hire advisers to help them try and raise billions of dollars to rebuild their reserves, said Mark Calabria, director of the FHFA.

He also has emphasized that the two companies need billions of dollars in additional capital before they can safely be set loose, to ensure any downturn in the housing market does not lead to their failures.

Fannie Mae did not respond to a request for comment.

The FHFA is seeking its own outside adviser to build a "roadmap" for recapitalizing the firms, and hopes to announce the pick by the end of November. Calabria has said he expects the FHFA to hire its adviser before Fannie and Freddie hire their own for any capital raise so as to avoid any conflicts of interest.

In addition, the FHFA is working on a rule establishing new capital standards for them. Calabria expects to announce in the coming weeks if the FHFA will need to re-propose that capital rule, which he has said must be finished before the companies can begin raising funds, potentially through public stock offerings.

The pair were only recently permitted to begin rebuilding their reserves, with the FHFA announcing in September they could retain up to $45 billion in earnings.

The Trump administration has vowed to end the long-standing government lifeline, with the Treasury Department offering in September a set of recommendations for returning the pair to their standing as private companies.

(Reporting by Michelle Price and Pete Schroeder, Editing by Franklin Paul, Jonathan Oatis and Diane Craft)

By Michelle Price and Pete Schroeder


Stocks mentioned in the article
ChangeLast1st jan.
BYD COMPANY LIMITED -0.93% 128.4 End-of-day quote.230.50%
FREDDIE MAC 3.85% 1.89 Delayed Quote.-37.08%
THE LEAD CO., INC. 2.11% 388 End-of-day quote.-0.51%
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Financials (USD)
Sales 2020 12 111 M - -
Net income 2020 -370 M - -
Net Debt 2020 - - -
P/E ratio 2020 -17,2x
Yield 2020 -
Capitalization 6 088 M 6 088 M -
Capi. / Sales 2020 0,50x
Capi. / Sales 2021 0,51x
Nbr of Employees 6 892
Free-Float 89,6%
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Mean consensus HOLD
Number of Analysts 4
Average target price 3,81 $
Last Close Price 1,89 $
Spread / Highest target 270%
Spread / Average Target 102%
Spread / Lowest Target 5,82%
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Managers
NameTitle
David M. Brickman President, Chief Executive Officer & Director
Sara Mathew Non-Executive Chairman
Christian Mark Lown Chief Financial Officer & Executive Vice President
Frank Nazzaro Chief Information Officer & Executive VP
Saiyid T. Naqvi Independent Director
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