Anworth slapped with repo default notice; Luminent may have value; HomeBanc files for bankruptcy

By Sheri Kasprzak

Aug. 10 - The hits just keep on coming in the mortgage-lending sector.

A subsidiary of Anworth Mortgage Asset Corp. received notice of default Friday from two of its repurchase agreement lenders.

The move comes just days after mortgage investment firm Luminent Mortgage Capital Inc. said two of its repo lenders had also sent them a default notice. Earlier this week, Luminent's stock went on a freefall, losing more than 75% of its value after announcing it could not make dividend payments because of its liquidity problems.

HomeBanc Corp., which bailed out of the mortgage-lending business earlier this week when it sold that business to Countrywide Financial Corp., said Friday it is seeking Chapter 11 bankruptcy protection.

Anworth said in a statement Friday that Belvedere Trust Mortgage Corp., its subsidiary, in addition to the default notices, received "substantial" margin requests from several repurchase agreements lenders.

According to Anworth's statement, the company "will continue to explore all of its alternatives with respect to its sudden liquidity issues. It is likely that a substantial amount of Belvedere Trust's portfolio of [mortgage-backed securities] may need to be sold in an effort to satisfy the requests of its lenders."

An analyst reached Friday said he feels this last point is the logical next step for Anworth - and other mortgage lenders like it.

"When things like this happen, really, the most you can do is just sell off some of your assets and pay off your lenders," he said. "It's a sector-wide problem but individual companies are feeling the pain. Now it's just a matter of selling off assets and cleaning up the mess."

Still, a sale of assets, by Anworth's own admission, would come well below their estimated fair value.

Anworth's exposure to the subsidiary includes its initial $100 million investment and loans totaling $42.8 million. Anworth said in its statement that it is not a counterparty to the repo borrowings and has not guaranteed those borrowings.

By 1:30 p.m. ET, Anworth's stock was down by more than 19.25% and at the end of the day, the stock had fallen by 19.61%, or $1.10, to close at $4.51 (NYSE: ANH).

Anworth is a Santa Monica, Calif.-based real estate investment trust that invests in mortgage pass-through certificates, collateralized mortgage obligations, mortgage loans and other real estate securities.

Luminent stock rises

Moving back to Luminent, the investment company's stock made a comeback Friday and one sellside trader said he feels there still may be some value left in the stock.

"It's all over the place," he said of Luminent's stock. "Whenever any bad news comes out, it's down. The next day, it's back up again."

This, according to the trader, is likely an indication that the stock still does have value but investors are skittish.

"It's the whole subprime thing," he said. "Any news and investors jump ship. It's only natural."

Luminent's stock gained about 44% at around 1:30 p.m. ET and went on to gained 18.82%,or 17 cents, to close at $1.01, but lost 11 cents, or 10.89%, in after-hours activity (NYSE: LUM). The stock had made a similar comeback on Wednesday after news on Tuesday that the company would not be making dividend payments, gaining as much as 50% before sliding again.

HomeBanc files for bankruptcy

In other mortgage-lending news, HomeBanc is seeking out bankruptcy protection just days after the company agreed to sell certain assets in its mortgage-lending business to Countrywide.

In a statement, HomeBanc said "after careful consideration, its [HomeBanc's] board of directors has authorized the company's management team to seek protection for the company through the bankruptcy process in order to best preserve the value of the company's remaining assets. Accordingly, HomeBanc Corp., together with certain of its subsidiaries, has today filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware."

Filing for bankruptcy, the HomeBanc statement said, will give the company the time it needs to provide the best value for its creditors and to "effect an orderly wind down of the company."

On Aug. 7, the Atlanta-based mortgage banking holding company, announced that it would not longer be able to borrow additional amounts under its credit facilities to satisfy its mortgage loan funding obligations.

CEO calls disruptions 'dramatic'

"The recent disruptions in the mortgage loan and real estate markets have been dramatic - in terms of both magnitude and timing," said Kevin D. Race, Home Banc's chief executive officer, in the company's news release.

"These conditions have had a severely negative effect on HomeBanc' liquidity and business operations, and have put HomeBanc in an untenable business position going forward. It is incredibly unfortunate that HomeBanc, a company that has been built upon a foundation of exceptional people, has become a victim of the rapid and utter deterioration in the market. We believe that, by seeking Chapter 11 bankruptcy protection, we will be provided with an opportunity to achieve the highest value in exchange for our assets, and therefore benefit our creditors."

Before ending the day up three-tenths of a cent, or 6.67%, to close at $0.048, the stock did gain more than 11%, or a penny, in afternoon trading (Pink Sheets: HMBN).

Bankruptcy whispers have plagued Luminent as well throughout the week. Sellside traders and analysts said earlier this week that the possibility of a bankruptcy announcement would not come as a surprise.

Even so, one analyst said he felt Luminent could operate just as well in bankruptcy as out.

Pope & Talbot toys with bankruptcy

Elsewhere in bankruptcy news, Pope & Talbot, Inc.'s stock closed down on Friday, a day after the pulp and paper products company said it may consider filing for bankruptcy, among other options.

The stock fell by 3.33%, or 2 cents, to close out the day at $0.58 (NYSE: POP). On Thursday, on news that the company is seeking alternatives to strengthen its balance sheet, the stock fell by 20 cents to close at $0.60.

The bankruptcy move, according to a form 10-Q filed Thursday with the Securities and Exchange Commission, would allow the company to restructure its debt as it seeks out asset sales and other capital infusions.

The company received a forbearance agreement connected to defaults on its $50 million revolving credit facility that requires the company to seek offers for the sale of most of its assets or equity interests. The revolver lenders also agreed not to exercise their loan default rights until Sept. 17.

There was $34.1 million outstanding under the revolver as of June 30.

Pope & Talbot is based in Portland, Ore.

Campbell's stock back up

A day after Campbell Soup Co. announced plans to sell off its Godiva Chocolatier business, the company's stock made a comeback.

The stock gained 2.07%, or 73 cents, on Friday to end at $35.98 (NYSE: CPB). On Thursday, when word of the sale was released, the stock fell by $1.70, or 4.6%, to end at $35.25.

The move to sell Godiva was a good one, according to market insiders on Thursday.

A sellside trader noted Thursday that the sale would allow Campbell to focus on its core products. The trader also said that once a buyer is identified, the stock would likely go up.

So far, William Wrigley Jr. Co. and Hershey Co. have been pegged as possible buyers for the sale, which is expected to fetch between $750 million and $1 billion.

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