Farmer Mac Raises Capital

The Federal Agricultural Mortgage Corp-oration (Farmer Mac) reported it raised additional capital in a private offering of shares of non-cumulative perpetual preferred stock of Farmer Mac II LLC, a recently organized Delaware limited liability company in which Farmer Mac owns all of the common equity.

Farmer Mac II LLC now operates the Farmer Mac II business that has operated since 1992 purchasing and holding USDA-guaranteed loans. Farmer Mac is using the proceeds from the sale of the $250 million of Farmer Mac II LLC preferred stock to repurchase and retire $150 million of Farmer Mac’s currently outstanding Series B preferred stock, and to further enhance Farmer Mac’s regulatory capital position.

The stated dividend rate on the new $250 million of preferred stock is 8.875%, and, after consideration of the consolidated tax benefits to Farmer Mac, the net effective cost is 5.77%. As a result, the net cost on Farmer Mac’s consolidated financial statements will be approximately $3.6 million per quarter, or $14.4 million per year.

The 8.875% dividend rate is in effect until March 30, 2015 when the preferred stock becomes callable and there is a rate step-up. The quarterly and annual cost of the existing $150 million of Series B preferred stock was $4.5 million and $18.0 million, respectively.