Luminent working to produce third-quarter 10-Q; CEO reviews recent actions taken to protect liquidity

By Jennifer Lanning Drey

Portland, Ore., Nov. 19 - Luminent Mortgage Capital, Inc. said Grant Thornton LLP, which recently took over as Luminent's public accounting firm, is reviewing the company's former consolidated financial statements and diligently working to file its third-quarter 10-Q with the Securities and Exchange Commission.

However, the company is not yet certain when it will be able to produce the financials, S. Trezevant Moore, Luminent's chief executive officer, said Monday during a conference call held to review the company's most recent reactions to market conditions.

"The subprime mortgage crisis does not seem to have run its course completely and we can make no assurances of Luminent's course of action in the future, but we will do whatever is practicable to maximize shareholder value," Moore said.

Luminent's recent steps taken in response to the market disruptions affecting its businesses include transferring $207 million of securities to satisfy obligations with one of its repo lenders and filing a lawsuit against two other repo lenders that Luminent believes did not act in a commercially responsible manner in their previous dealings with the company, he said.

At June 30, the company had $3.4 billion of residential mortgage-backed securities, a majority of which have been sold by the company at substantial and material losses in order for Luminent to meet margin calls, Moore said.

"No one can predict an end to this crisis anytime soon. Luminent was, and is, not immune to the market meltdown," he said during the call.

Moore also said three members of Luminent's board of directors have stepped down and four new members have been appointed. Two of the new board members also serve as executives for Arco Capital Corp. Ltd., the company from which Luminent obtained a $60 million revolving line of credit in October.

During Monday's call, Moore reiterated other past actions the company has taken to improve its liquidity, including the full repayment of its asset-backed commercial paper facility in September, which completely satisfied its obligations under the facility.

The company has also reduced its workforce by about 50% and will close its San Francisco office as part of its strategic reorganization efforts, he said.

Luminent's current chief financial officer, Christopher J. Zyda, will be replaced by now-comptroller Karen Chang in January, following the move. The company said the change is being made because Zyda did not want to relocate to Philadelphia, as would be required for him to continue in the position.

Luminent is a San Francisco-based real estate investment trust that invests in mortgage-backed securities and loans. The company will relocate its headquarters to Philadelphia in January.

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