Another closely watched mortgage industry participant has gotten a temporary reprieve as its lenders agree to forbearance for threatened margin calls.
Thornburg Mortgage said that five lenders have agreed to a deal where no further margin calls will be made in return for its compliance with a laundry list of requirements. Among the requirements; the Santa Fe based company has seven days in which it must raise at least $948 million in new capital. It must suspend its shareholder dividend and agree not to undertake any borrowing in the reverse-repurchase agreement market in which collateralized short-term borrowing is done.
Thornburg will give the five lenders, Bear Stearns Cos., Citigroup Inc., Credit
Suisse Group, Royal Bank of Scotland Group PLC and UBS AG, warrants which they
can exercise into 47 million shares of the company at $.01
cent each. If exercised this would give Thornburg's creditors 27 percent of
its stock.
Thornburg said that, without the agreement, it was facing an additional $90
million in margin calls and the possibility of additional calls resulting from
a continued decline in mortgage securities prices. The company had said last
week that its survival was in doubt.
This week's deal is for 364 days; the five lenders have provided about $5.8 billion in repo financing to Thornburg.