Posted by David Gaffen
March 3, 2008, 2:40 pm
Investors in Thornburg Mortgage have had to endure a lot of pain in the last three trading sessions. After disclosures of margin calls on certain investments ? followed today by more margin calls ? the stock has given up 68% of its value since closing Wednesday at $11.54 a share.
It?s not as if subprime mortgages did this company in ? they?re a jumbo-loan lender, but generally tended to lend to higher-quality borrowers. But the freezing of the credit markets has hammered this company, as the company is facing a shortage of cash after finding itself unable to meet margin calls amounting to about $270 million. The value of the company?s adjustable-rate mortgage portfolio of about $2.9 billion ?is uncertain? at this time, and the firm has ?limited available liquidity? to meet these calls.
This, after it announced $300 million in margin calls last week (which it is meeting). The calls come on the firm?s reverse repurchasing agreements ? purchases of securities with an agreement to resell them at a higher price later on. The problem? The mortgage-backed securities are deteriorating in value, forcing margin calls, as investors have been frightened away from most credit instruments not named ?U.S. Treasury note.?
?The market for anything but plain-vanilla paper has really dried up,? says Michael Larson, analyst at Weiss Research in Jupiter, Fla. Other lenders, such as American Home Mortgage and New Century Financial, faced similar liquidity problems in the past, but they were also subprime lenders.
See the full article here.
