Fannie Mae $2 billion three-year mandatory convertible preferreds talked 8.75%-9.25%, up 18%-22%

By Rebecca Melvin

New York, May 6 - Fannie Mae plans to sell $2 billion of three-year mandatory convertible preferred stock at par of $50 after the market close on Thursday, according to a syndicate source on Tuesday.

The offering, which is being sold via joint bookrunners Banc of America, Lehman Brothers and J.P. Morgan Securities Inc., was talked with a dividend of 8.75% to 9.25% and an initial conversion premium of 18% to 22%.

The convertible preferreds will automatically convert no later than May 15, 2011 at a conversion rate that will be determined at pricing.

Fannie Mae will concurrently offer $2 billion of common stock. In addition, pricing of an offering of non-cumulative, non-convertible preferred stock will follow in the "very near future," for a total new capital raise of $6 billion, according to a Fannie Mae news release.

Proceeds from the offerings will be used for general corporate purposes, including enabling the company to maintain a strong, conservative balance sheet, enhancing long-term shareholder value and providing stability to the secondary mortgage market.

The home mortgage lending company is based in Washington, D.C.

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