Posted on 03/19/2008 3:05:53 PM PDT by BGHater
Thornburg Mortgage has said it is trying to raise almost $1bn (£500m) in extra capital to avert a possible bankruptcy filing.
The lender, which specialises in big home loans, also plans to offer its lenders a 27% stake in the company.
The measures will significantly dilute the stakes of existing shareholders and the company's shares fell 47%.
Thornburg said that without the new capital it may be forced to seek bankruptcy protection.
Jumbo loans
In a filing with the Securities and Exchange Commission, the company warned that bankruptcy would be a possibility because it would have to sell off the rest of its mortgage assets at depressed prices.
Thornburg specialises in so-called jumbo loans of more than $417,000, which means that until recently they were not eligible for funding from the government-sponsored mortgage agencies Fannie Mae and Freddie Mac.
Thornburg's problems are another sign of the credit crunch spreading from sub-prime lenders to others.
It owes money to five lenders, which are affiliates of Bear Stearns, Citigroup, Credit Suisse, Royal Bank of Scotland and UBS.
The fresh falls in Thornburg's share price followed a 32.4% fall on Monday last week after the company said it could not meet demands for extra cash and collateral from its lenders.
The race hustlers could whine all they wanted. If the Federal Reserve had not expanded credit there would not have been any money for this.
Fewer and Fewer Euro Coins Equal One Dollar Today
Drop in Dollar Could Add to U.S. Economic Woes
The Fed's favorite theme song:
"We need more money for more credit. We need more idiots to borrow more money . . . Need, need, need . . .Borrow, borrow, borrow . . . spend, spend, spend"
It is like the old saw about robbing banks because that is where the money is.
The dollar is dropping because risk-averse [foreign] investors HAVE stopped funding the U.S. current account deficit.
You are exactly right. This company is actually a good mortgage company. They have never done subprime, they specialize in jumbo mortgages to rich people with Alt-A loans. They are extremely careful about who they loan to. While other mortgage securities are approaching 25% troubled mortgages, Thornburg's securities are at about .4% behind.
Its the financing model that is killing them, and their only real flaw. They were hit once in August when the commercial paper market froze, and have been hit again when they recieved margin calls on their securities. They are just too leveraged. They may survive, but if they do they will be a penny stock for a long, long time.
Well, I haven’t been called a “Marxist” per se, but someone long ago said (in response to one my scathing, whiny anti-Fed bailout posts) “How long have you hated capitalism?”. LOL. Does that qualify?
I think my response was something like “I like tomatoes too!”
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