WASHINGTON - Fannie Mae has released the details of the subordinated debt funding initiative it included as part of a package of voluntary enhancements to risk management, capital, and disclosure practices announced Oct. 19.

"Early in 2001, Fannie Mae will begin the issuance of a regular series of large-sized subordinated debt securities known as Subordinated Benchmark Notes," said Franklin D. Raines, chairman and chief executive officer, on Friday. "Subordinated Benchmark Notes are a critical component of our recently announced capital, disclosure and risk mitigation initiative, which put Fannie Mae at the forefront of safety and soundness protections."

The government-sponsored enterprise will issue subordinated benchmark notes as often as each quarter next year, and at least twice a year after that, Mr. Raines said. The company expects to issue as much as $15 billion of the notes over a "three-year phase-in period" that will run through the end of 2003, he said.

Fannie has appointed Morgan Stanley Dean Witter & Co. as the adviser and arranger, and tapped Goldman, Sachs & Co., Morgan Stanley, and Salomon Smith Barney as joint-lead managers for the inaugural transaction, which is expected to take place early next year.

Timothy Howard, Fannie's chief financial officer, said the unsecured notes would be "in addition to, and not a substitute for," core capital. The notes "would provide an additional loss absorbing capital layer, and that their trading level would be an early warning signal of the market's perception of the company's financial strength," he said.

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