Fannie Mae prices $4.5 billion stock offering

NEW YORK -- Fannie Mae said late Thursday it will sell about $4.5 billion of common stock and preferred stock to raise cash after posting a $2.2 billion loss for the first quarter.

The mortgage buyer announced plans Tuesday to raise $6 billion, mostly by issuing new shares, and also cut its dividend as it looks to stabilize its finances.

Federal regulators said they would cut the capital cushion required of Fannie Mae to 15 percent of its total mortgage debt, down from the current 20 percent, after the company raised $6 billion.

Fannie Mae said it will sell 82 million shares of common stock at $27.50 per share, worth about $2.25 billion, and 45 million shares of preferred stock priced at $50 per share, also worth $2.25 billion. The preferred stock will pay a dividend equaling 8.75 percent a year.

The preferred shares will automatically convert into common stock in May 2011 and may be exchanged for 1.5408 shares of common stock anytime before then.

Both sales are expected to close Wednesday. The company said it expects to offer more preferred stock soon.

"Investor demand for these offerings was very strong, which we believe reflects investor confidence in the long-term value of our business," Fannie Mae Treasurer David Benson said in a written statement.

The stock sale's underwriters have the option to buy an additional 12.3 million shares of common stock and 6.75 million additional shares of preferred stock. Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. are among the underwriters.

Fannie Mae shares fell $1.42, or 4.9 percent, to $27.63 Thursday.