Thornburg to Raise $1.35 Billion to Meet Override Agreement

March 25, 2008 No Comments »


The rollercoaster that is Thornburg Mortgage surged today on news the struggling mortgage lender had lined up a plan to raise adequate capital to satisfy a recent agreement between itself and its lenders.

The Santa Fe, New Mexico-based jumbo mortgage and adjustable-rate mortgage lender announced today that it will commence a private placement of up to $1.35 billion in senior subordinated secured notes due in 2015 to satisfy the Override Agreement revealed last week.

The company will also issue detachable warrants to investors who purchase the senior notes to purchase common stock, which are exercisable at a penny per share.

If exercised, they would account for 48 percent of outstanding shares, but under the terms of the deal, Thornburg is required to seek shareholder approval to amend the company’s charter to increase the number of shares of capital stock it’s authorized to issue.

“However, after a careful review of the facts, the members of the Audit Committee of Thornburg Mortgage’s Board of Directors determined that any delay caused by securing shareholder approval prior to the issuance of these securities would seriously jeopardize the financial viability of the company,” the statement said.

“Pursuant to an exception in the New York Stock Exchange’s shareholder approval policy, the company’s audit committee members approved the company’s omission to seek the shareholder approval that would otherwise have been required under that policy.”

Thornburg needs to come up with $948 million on or before March 27 to stave off any additional margin calls and a subsequent bankruptcy, so it plans to apply to the New York Stock Exchange for the exception.

But if the company and the lead investor do not enter into definitive documents on or before that date, Thornburg would be obligated to pay the lead investor a termination fee of $18 million, plus expenses.

The company said it will also conduct a tender offer for at least 90 percent of its outstanding preferred stock at a price of $5 per $25 of liquidation value plus warrants to purchase an aggregate of 5 percent of the company’s outstanding stock on a fully diluted basis, reducing private placement investors’ interest to 85 percent.

Shares of Thornburg Mortgage were up 42 cents, or 33.19%, to $1.69 in late morning trading on Wall Street.

(photo: katemonkey)

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