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Pushed over the edge because of debt

As on March 6, Thornburg Mortgage (TMA) said it failed to meet a $28 million margin call from J P Morgan Chase (JPM), triggering a series of "material" cross-defaults on various lending agreements.

JPM's lending agreements with Thornburg total about $320 million, a small fraction of the $11.5 billion in reverse repurchase ("repo") agreements that TMA had as of December 31, 2007. Nonetheless, JPMorgan refused to budge, notifying Thornburg that it planned to exercise its rights under the loan agreement (i.e. seize the underlying collateral) due to the default. Shares of TMA obviously tanked on the news.

1. The company failed to meet its obligations under a loan with JP Morgan.
2. JP Morgan has decided to excercise its rights under the agreement to collect on the $320 million that it is owed.
3. This event has gone awry of clauses in all of Thornburg’s other lending agreements, and pushed it into default over them.

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