Thornburg Mortgage Raises Capital
Thornburg Mortgage (TMA: 0.1825 -0.0175 -8.75%) today raised $500 Million in a Cumulative Convertible Redeemable Preferred Stock Offering. The preferred shares were priced at $25 with a 10% dividend. The dividend will be the higher of 10% or the quarterly yield on the common stock.
The preferred shares are also convertible to common stock at anytime at a conversion price of $11.50 per common share.
In my opinion they paid a pretty steep price to shore up their capital structure. The holders of these preferred shares will do very well if the company recovers. However, the Thornburg management maintains control of their destiny and the share price is up about 7% today.
I remain an owner of TMA stock and think the company will do well if they are still swimming when the home and mortgage markets start recovering.
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2 Responses to “Thornburg Mortgage Raises Capital”
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What we are experiencing is a crisis of confidednce. This is an emotional process, with very little objectivity. Granted the price is high. But notice that the securities sold out. And TMA is back in business, albeit on a much lower level.
Now they are in a position to demonstrate their ability to function in a turbulent market place. Plus the rates they get will preserve their interest differential on this incremental business.
If they leverage their cash at 10%, than will give them enough capability to do $5 billion in new mortgages. Remember, these mortgages are fully documented, high credit score individuals making these mortages, not sub primes or alt-As.
All in all, a good strategic move by TMA. Kudos to their management team.
In the interests of Full Disclosure, I am a TMA stockholder. I just wish I had a bunch of free cash.
Thanks Albert, I have a lot of faith in the management abilities of TMA. The current market just makes it difficult for them to leverage their capital. I too am keeping my stock, and dabbling in some call options for shorter term gains.