July 10 (Bloomberg) -- Freddie Mac, the mortgage-finance company under government control, offered to repurchase as much as $4.4 billion of its subordinated notes from investors.

The company will pay prices that translate into yields between 1 percentage point and 1.25 percentage point more than similar-maturity Treasuries, McLean, Virginia-based Freddie Mac said today in a statement. The purchases would be above market prices, according to data complied by Bloomberg.

“We’re doing it to provide liquidity to this market, and retiring these high-coupon bonds also reduces our cost of funding,” Lisa Gagnon, a company spokeswoman, said in a telephone interview.

Regulators decided when seizing the company and competitor Fannie Mae in September amid growing losses tied to the U.S. housing slump to not hurt holders of their senior, subordinated and mortgage bonds, while suspending dividends on preferred stock and diluting holders of common shares.

After the takeovers, the Federal Housing Finance Agency stopped releasing calculations of the companies’ regulatory capital ratios. The U.S. chose instead to rely on shareholder equity as a measure of when injections under the companies’ $200 billion Treasury Department lifelines are needed.

Financial companies use subordinated debt, which ranks below senior debt and above preferred and common shares in the event of bankruptcy, as a type of capital.

Breadth of Buyback

While Fannie Mae and Freddie Mac didn’t include subordinated debt among capital under their standard reserve calculations, the companies in agreements formalized in 2005, after accounting scandals, submitted themselves to separate calculations that measured their capital and subordinated debt against assets and guarantees, according to FHFA’s Web site.

Freddie Mac may repurchase three series of securities representing all but $400 million of its subordinated debt outstanding, Gagnon said. The company has bought back $24 billion of senior debt under tender offers since June.

The tender period starts July 13 at 9 a.m. in New York and ends July 17 at 5 p.m., according to the statement. Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc. are managing the deal, the company said.

One of the series to be repurchased, Freddie Mac’s 5.75 percent subordinated notes due June 27, 2016, which fell as low as 90 cents on the dollar last year on concern payments would be halted, traded at 103.8 cents at 3:04 p.m. to yield 5.07 percent, compared with 2.88 percent on the relevant Treasury, data complied by Bloomberg show.

Congress created Freddie Mac and Washington-based Fannie Mae to provide mortgage-market stability and expand homeownership by increasing financing. The companies own or guarantee more than half of the U.S. single-family home loans outstanding.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

Last Updated: July 10, 2009 17:09 EDT