Thornburg Staves Off Bankruptcy After Raising Capital

April 1, 2008 No Comments »

close call

Two extensions later, mortgage lender Thornburg Mortgage was able to raise the much needed capital to stave off a potential bankruptcy and make good with its own lenders.

The Santa Fe, New Mexico-based company said late last night in a statement that it raised $1.35 billion via a private placement of senior subordinated secured notes and warrants.

Thornburg has already received $1.15 billion, with the remaining $200 million held in escrow until the successful completion of its preferred stock offering.

The company will conduct a tender offer for all of its outstanding preferred stock at a price of $5 per $25 of liquidation value.

The proceeds will be used to satisfy outstanding margin calls with five of its remaining lenders, central to the Override Agreement that will prevent further margin calls from plaguing the company for the next year.

As part of the agreement, the remaining lenders will provide Thornburg with $5.8 billion in reverse repurchase agreement financing.

Although it’s relatively good news, upon completion of the aforementioned transactions, common shareholders will hold only roughly 5.5 percent of common stock on a fully diluted basis.

Additionally, the company has agreed to allow certain investors to designate up to five members of the company’s ten-member board, pushing five of the current board members towards resignation as a result.

Thornburg was originally supposed to come up with the money on March 27, but had to request two extensions before it was eventually able to raise the necessary capital.

Shares of Thornburg Mortgage were up 19 cents, or 15.71%, to $1.40 in midday trading on Wall Street.

The company specializes in jumbo mortgages and adjustable-rate mortgages.

(photo: stephendann)

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