Thornburg Shares Nosedive on 'Material' Defaults

Thornburg Mortgage,

Foreclosured Home
David J. Phillip
Foreclosured Home

said on Wednesday its failure to meet a margin call has triggered defaults under a variety of lending agreements and its obligations under those agreements are "material."

The shares of the "jumbo" mortgage lender plunged $1.42, or 41.8 percent, to $1.98 in after-hours electronic trading.

Thornburg's late afternoon announcement raises concerns about a cash squeeze at the Santa Fe, New Mexico-based company. At least one analyst has said Thornburg might need to seek bankruptcy protection if it cannot meet margin calls.

Thornburg did not immediately return a call seeking further comment.

In a regulatory filing late on Wednesday, Thornburg said it failed to meet a $28 million margin call from JPMorgan Chase and said the bank will exercise its rights under an agreement under which Thornburg had borrowed $320 million.

Thornburg said the notification from JPMorgan Chase triggered cross-defaults under all its other reverse repurchase agreements and secured loan agreements, and that "the company's obligations under those agreements are material."

Thornburg was already facing pressure after reporting on Monday that it had failed to meet a "substantial majority" of $270 million of margin calls since Feb 27.

It said more failures could materially hurt its ability to operate and it was trying to sell securities, offer debt or raise capital to bolster liquidity. Margin calls force borrowers to pay back loans or post more collateral. Thornburg shares fell 51 percent on Monday.

Thornburg has suffered as the housing slump and tight credit conditions caused investors to stop buying securities they no longer consider safe, including the higher-rated jumbo mortgages above $417,000 in which Thornburg specializes.

Citigroup Global Markets analyst Donald Fandetti wrote on Monday that, if Thornburg was unable to sell assets or raise equity capital to meet margin calls, it might have to file for bankruptcy protection.