January 26, 2010 (FinancialWire) — The Federal Agricultural Mortgage Corp., or Farmer Mac), (NYSE: AGM) said it has 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 is now operating the Farmer Mac II business that has operated since 1992 purchasing and holding A-guaranteed loans. Farmer Mac said it 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 percent, and, after consideration of the consolidated tax benefits to Farmer Mac, the net effective cost is 5.77 percent.

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 percent dividend rate is in effect until March 30, 2015 when the preferred stock becomes callable and there is a rate step-up.

Farmer Mac said the quarterly and annual cost of the existing $150 million of series B preferred stock was $4.5 million and $18.0 million, respectively, based on the 2010 dividend rate of 12 percent, which was scheduled to increase to 14 percent at the end of 2010 and 16 percent in 2011.

Washington, D.C.-based Farmer Mac is a stockholder-owned instrumentality of the United States chartered by Congress to establish a secondary market for agricultural real estate and rural housing mortgage loans and rural utilities loans and to facilitate capital market funding for A-guaranteed farm program and rural development loans.  

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