Thornburg Stock Tumbles, Bankruptcy Ruled Out

August 14, 2007 No Comments »

After a terrible day on Wall Street, with shares of his company shedding nearly half their market value, Thornburg Mortgage president Larry Goldstone attempted to ease investor worries live on CNBC.

While there’s not much you can really say to put things right after receiving five analyst downgrades in one day, Goldstone did his best to assure investors that Thornburg Mortgage is here to stay.

Goldstone was quick to say that 80% of the “rumors” were not true and that the mortgage lender would not seek Chapter 11 bankruptcy, noting it wouldn’t do the company any good, and would likely make matters worse.

He said the company was able to meet 80% of its obligations, but was taking measures to fund all day-to-day positions.

Goldstone threw other banks “under the bus” in the process, noting that hundreds of lenders nationwide weren’t funding loans, mainly because the secondary market wasn’t functioning properly (at all).

He said the funding of jumbo loans (their bread and butter) was extremely difficult, citing the fact that conforming loans were really the only marketable mortgage-backed securities selling on the secondary market.

Goldstone added that if the company sold everything today they would still have $14.28 a share leftover, factoring in the diminished value of Thornburg assets over recent weeks.

The company also issued a statement after market close regarding the delay of their second-quarter dividend of 68 cents per share, which though originally scheduled for tomorrow, will now be paid out September 17.

Thornburg Mortgage is a lender based in Santa Fe, New Mexico, chiefly providing adjustable-rate loans in the jumbo mortgage sphere, which happens to be the riskiest sector aside from subprime.

Shares of Thornburg Mortgage freefalled 46.71% Tuesday to end the day at a dismal $7.61.

After Thornburg ruled out bankruptcy, shares leapt over 25% to $9.58 a share in after hours trading.

Unfortunately, it doesn’t make much sense for the shares to go anywhere but down, though investors seemed hopeful on the news.

I suppose time will tell if Thornburg is able to avoid landing on the closed lenders list.

Update: Traders reacted well to the words from the CEO last night, with the stock up nearly 50% Wednesday morning.

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