Fannie Mae sells $5b in stock in bid to get back on track.

Fannie Mae agreed to sell to "qualified institutional buyers" an aggregate of $5 billion in two placements of non-cumulative preferred stock.

The $2.5 billion series of 5.375 percent Non-Cumulative Convertible Series 2004-1 Preferred Stock has a stated value and liquidation preference of $100,000 per share and is convertible by holders into shares of Fannie Mae common stock at a conversion price of $94.31.

Fannie Mae also priced $2.5 billion of Non-Cumulative Preferred Stock Series O with a stated value of $50 per share and is a non-convertible floating rate preferred stock with an original coupon of 7.00 percent.

The coupon re-prices quarterly at the higher of 7.00 percent and the sum of the 10-year CMT rate plus 237.5 basis points. Lehman Brothers Inc. served as sole placement agent for these transactions. "This placement of preferred stock is a key component of Fannie Mae's capital restoration plan," said Donald Marron, the member of the Board of Directors who is leading the company's work with OFHEO on the required capital plan.

"Working with our safety and soundness regulator OFHEO, we will be finalizing the details of the capital plan shortly."

"Fannie Mae's announcement of its placement of preferred stock represents the largest capital placement ever undertaken by Fannie Mae," said Stephen Ashley, non-executive chairman of the Fannie Mae Board of Directors.

"I want to compliment interim CEO Daniel Mudd and company management for its efforts to get this done."

"The company has pledged to work with OFHEO to take steps to properly address our capital situation," Ann Korologos, presiding director of the Board of Directors, added.

"We thank OFHEO for its willingness to work with the Board and management to take this step expeditiously."

These transactions were expected to December 30, 2004.