What the heck to do with Thornburg Mortgage
Every time it looks like Thornburg Mortgage (TMA: 0.79 0.00 0.00%) is back on track to profitability, it gets whacked by more bad news. Last week they announced they had to cough up $300 million to meet margin requirements. Today, they are on the hook for another $270 million. They do not have the cash!
The margin calls come as the mortgage securities are marked-to-market and prices are falling. Although TMA plans to hold the securities until repaid, they must still meet margin requirements. Since Thornburg does not have a default problem with their portfolio, it seems someone is putting the squeeze on them, or just rampant fear rules the mortgage security market, no matter what the quality.
If Thornburg can survive this round, I assume the security prices will recover at some time and the company will the cash. Also, today the company announced they had successfully securitized $1 billion in high quality hybid ARMs. How does that work out?
A week ago the stock was $12+, now $4. A month ago, CEO Larry Goldstone was very high on the company’s prospects. Now many in the financial press are predicting bankruptcy. I have had a lot of faith in the management of TMA, but this time I am not sure they can fight the entire mortgage market meltdown. I will be hanging on to my long positions in TMA but can really understand those who have or are tempted to bail out.
Official press release here. Read it and make your own decision on what is between the lines.
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