Residential mortgage lender Thornburg Mortgage Inc. (THMR.PK), Wednesday said it expects to file for Chapter 11 bankruptcy protection, and discontinue operations.
The Santa Fe, New Mexico-based company said it plans to sell or liquidate its remaining assets assisted by the restructuring firm Houlihan Lokey Howard & Zukin Capital Inc. in order to maximize any remaining value for its bondholders and creditors.
The company also said that it will not be able to make an interest payment due March 31 on its senior subordinated notes due 2015. However, the company has a 30-day grace period in which to make such payment before triggering a default under the senior subordinated notes indenture.
Last month, Thornburg's amended and restated override agreement with counterparties expired in accordance with its terms.
The counterparties of the agreement were certain affiliates of the company and JPMorgan Chase Funding Inc. (JPM), Citigroup Global Markets Ltd., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets Inc., Greenwich Capital Derivatives Inc., The Royal Bank of Scotland plc (RBS), and UBS AG (UBS).
The counterparties of the agreement have agreed to grant the company additional forbearance from demanding payment on deficiency claims under their various financing agreements through April 30, 2009, or earlier if certain events occur.
In exchange for the continued forbearance, Thornburg has agreed that the remaining counterparties who have not previously taken possession of their collateral under their respective financing agreements may do so at the counterparty's discretion and that the price of such collateral will be determined on a date chosen by the counterparty. The proceeds from such sales will be applied to reduce the outstanding borrowing amount under the respective financing and ISDA agreements.
JPM, CSUSA, CSI, GCM, GCD and RBS have indicated that they intend to take possession of and sell such collateral during the forbearance period. Citigroup and UBS have agreed to continue to forbear on submitting deficiency claims totaling about $394 million and $87 million, respectively, through April 30, 2009, or earlier if certain events occur.
As a result of the expected and realized deficiency claims, Thornburg has also agreed to cooperate with the counterparties to transfer the company's mortgage servicing rights, which were granted to the counterparties as security for the company's obligations to the counterparties under their respective financing agreements.
The company also said it does not expect to file its Annual Report on Form 10-K for the year ended December 31, 2008.
Thornburg noted that Thornburg Investment Management will not be affected by its bankruptcy filing, as the two firms are separate and independent legal entities. Garrett Thornburg is the chairman of both firms.
Thornburg Mortgage is currently trading at $0.02, down 3 cents or 64.00% on a volume of 85.68 million shares. The stock has been moving in a range of $0.02 - $17.00 for the past 52 weeks, with an average daily volume of about 5.70 million shares for the past three months.
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