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Thornburg Mortgage: Firm fears shutdown amid stock dive
Lender hopes $1 billion in financing will improve outlook

Bob Quick | The New Mexican
Posted: Monday, March 03, 2008
- 3/4/08
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Shares of Thornburg Mortgage, one of Santa Fe's major private employers, fell 47 percent Monday after the company said it might not be able to meet margin calls of at least $270 million and could be forced to go out of business.

Margin calls occur when lenders determine the value of their loans has decreased, which leads them to demand more funds from the borrower, which in this case is Thornburg.

But late Monday afternoon, the fate of Thornburg Mortgage took a turn for the better, with Thornburg saying it had completed financing of about $1 billion in mortgages that will help improve its liquidity and provide long-term funding.

"In summary, this transaction enhances Thornburg Mortgage's liquidity position and provides long term financing for the company's originated mortgage loans," the company said in a news release.

Earlier Monday, dark clouds had hung over the company. Thornburg Mortgage had said in a statement that the company was "working to meet all of its outstanding margin calls within a time frame acceptable to its lenders by either selling portfolio securities or raising additional debt or equity capital."

The statement said the calls "are strictly the result of continued deterioration of prices of mortgage-backed securities precipitated by difficult market conditions."

Thornburg, the statement said, had raised more than $300 million through Feb. 27, but after that, the company "saw further continued deterioration in the market prices of its high quality, primarily AAA-rated mortgage securities," which led to more calls for additional cash.

Thornburg Mortgage now has only a limited amount of funds, and if the company is required to raise additional capital, that could "affect the company's ability to continue its business in the current manner," the statement said.

Thornburg Mortgage has about 200 employees in Santa Fe and elsewhere and more than 300 correspondent partners around the country. The company is the 19th largest correspondent lender in the U.S. Thornburg Cos., the parent company of Thornburg Mortgage, last September broke ground on a 102,000-square-foot office campus on the northwest side of Santa Fe.

In a recent interview, Garrett Thornburg, chairman of Thornburg Cos., and Larry Goldstone, president and chief executive officer, said the company had "survived one of the toughest mortgage market environments in history" and was in the position "to take advantage of market opportunities we anticipate in 2008."

Garrett Thornburg purchased 1 million shares of Thornburg Mortgage last Oct. 19 and now has more than 4 million shares of the company in his portfolio.

Richard Bock, an independent affiliate of Girard Securities who has clients with Thornburg Mortgage shares, said, " I feel we have been misled" about Thornburg Mortgage stock, which most investors believed was part of the high end of the credit market. "Nothing is immune from credit woes," Bock said.

Some of his customers holding Thornburg Mortgage shares liquidated their holdings Monday, Bock said, while others are holding on in the expectation the company will turn around once again.

Standard & Poor's on Monday afternoon cut its counterpart rating on Thornburg to SD — one of the lowest grades possible — from B-. The new rating indicates Thornburg is in "selective default" because of the one notice it already received. S&P said in a statement that Thornburg faces challenges "in maintaining its access to funding and liquidity."

More than 70 million TMA shares were bought and sold Monday, and the stock closed at $4.69, down $4.18 or 47 percent.

Donald Fandetti, an analyst with Citigroup Global Markets, dropped Thornburg Mortgage to "sell" from "hold "on Monday and said the company is likely to suspend the 25-cent dividend it started paying in December.

Another analyst, Moshe Orenbuch at Credit Suisse, rated Thornburg Mortgage "underperform," down from "neutral."

The businesses of Thornburg Investment Management are not related to the business of Thornburg Mortgage. Mutual funds and other client accounts managed by Thornburg Investment Management have no investments in any debt or equity issued by Thornburg Mortgage.

Information from the Associated Press was used in this story.

Contact Bob Quick at 986-3011 or bobquick@sfnewmexican.com.


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