Shares of Thornburg Mortgage, a provider of jumbo mortgages that is trying to stave off a bankruptcy filing, rose 36 percent on Tuesday after the company disclosed plans to raise $1.35 billion.
The rescue plan gives new investors debt that pays 18 percent and a chance at ownership of as much as 90 percent of the company, according to terms of a private placement that Thornburg outlined in a statement Tuesday. Thornburg, based in Santa Fe, N.M., is asking the New York Stock Exchange for permission to issue new securities without a shareholder vote because delay “would seriously jeopardize the financial viability of the company.”
Thornburg needs to raise almost $1 billion this week to meet margin calls from its bankers.
“Thornburg has a tight time window and you have to take measures you normally wouldn’t employ,” said Keith Gumbinger, vice president of HSH Associates, a mortgage industry research firm in Pompton Plains, N.J. “An 18 percent yield attracts instant attention.”
In trading Tuesday, Thornburg rose 46 cents, to $1.73, on volume of more than 52 million shares. Last June, the stock sold around $28.
MaitlinPatterson Global Opportunities Partners III, which invests in bankrupt and distressed companies, agreed to buy $450 million of the notes, Thornburg said in a separate filing. Mark Patterson, a MaitlinPatterson founder, said current prices on distressed debt made this a “great buying time.”
Thornburg has run short on cash as falling home sales cut into demand, and fixed-income investors, fearing losses on investments linked to subprime home loans, avoided the company’s securities.
Thornburg, though, avoided subprime lending, which has the highest incidence of defaults. It specialized in mortgages of more than $417,000, which were typically used to buy homes by people with stronger credit records. Until recently, such loans were too big to qualify for purchase by government-sponsored entities like Fannie Mae, which limited their appeal to investors.
From the New York Times.
Private Placement Memorandum New York
PPM New York