Thornburg Mortgage reaches an agreement with 5 lenders to suspend margin calls. TMA agrees to suspend dividend for 2008 and grants warrants for 27% of company at 1 cent per share.
Thornburg Mortgage received margin calls totalling $570 million for Alt-A mortgage securities that have fallen in value. Continued viability of TMA is in doubt.
Thornburg Mortgage announced a Q3 loss of $1.08 billion, which is equivalent to $8.83 per share, compared to a net profit of $75.3 million last year. Also, the company announced that it will not pay any dividend to its common stockholders. The loss was mainly due to the sale of jumbo mortgages.
Thornburg Mortgage Inc. announced that it has sold approximately $22 billion in assets since August 2007, $1.6 billion higher than the earlier estimate of $20.4 billion. The company lost $1.1 billion selling adjustable-rate home loans. This loss is higher than previous expectations of $863 million announced by the company earlier.
Owing to the present liquidity crisis in the short term debt-market as well as that experienced by the company, Thornburg Mortgage plans to sell convertible preferred stock worth $500 million. The preferred shares will be convertible to common stock at $11.50 per share and is expected to pay a dividend of at least 10 percent.
Thornburg Mortgage, Inc has been sued by Wachovia Bank, a unit of Wachovia Corp, for breach of contract over the mortgage lender's failure to pay $5.1 million to Wachovia Bank.
Thornburg Mortgage sold $20.5 billion of assets and reduced its borrowings to counter the difficult market conditions prevailing for home loans. This resulted in a capital loss of $930 million and also led to decrease in the book value from $14.28 per share on August 13, 2007 to $12.40 per share on August 17, 2007.
TMA’s rating was downgraded by a few analysts stating that the high economic leverage and declining values will make it difficult for the company to meet liquidity challenges.
