Thornburg Mortgage sells its soul to stay afloat
According to the WSJ, Thornburg Mortgage has reached a agreement with 5 of its lenders to freeze margin calls at this time. From what I read the price is very high:
- The 5 lenders will receive warrants for up to 27% of the outstanding common stock at 1¢ per share.
- The dividend will be suspended for the remainder of 2008. If profitable the company can declare a dividend in December to be paid in January 2009.
- The repo parties will keep 100% of the principal repayments on the affected securities and 20% of the interest paid.
- TMA must still raise close to $1 billion in new capital in the next 7 days.
I hope they can make this fly and keep the company going. Beside being a shareholder, I have a mortgage through Thornburg, and they have quality service. I guess time will tell if this move is enough to save the company.
Note: I have a long position in TMA.
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Comments
Tim-
I have 2 questions, 1) Do you think the recent news of the fed accepting CMO paper on the 27th will affect this deal and 2) what is the change of a reverse stock split or buyback to improve the huge float and prevent de-listing??
thanks,
Adam
I am clueless as to the future for TMA stock. I had considered that they BK to stave off lenders, but they need to keep borrowing to fund their business. I think the stock will rise again as soon CMOs start rising in value for quality paper, if that ever happens. TMA still has a big chunk of valuable assets, if not under current market conditions. At this point, it is just wait and see.
I am interesetd in the senior notes of this company , 8% due 2013.
According to this site http://datacenter.treasury.erstebank.com/www/index.html?LANG=en last price was 31.75 but I cannot see the bid-offer spread. Can anyone give me the link to a site showing such info ?
Tim,
I agree that TMA paid a hefty price for survival. IF they can make it through this do you think the stock will have any upside, ever? It seems the market is just crushing the stock on this news, however, I think it’s better than filing bankruptcy and shutting down. If they can return to profitability and become a quality company again you would think they could build up the pps over time, right? As a fellow long I would be interested to know your thoughts?
Thanks.