Luminent Mortgage Capital seeks short-term liquidity relief through Arco

By Lisa Kerner

Charlotte, N.C., Aug. 20 - Luminent Mortgage Capital Inc. hopes to address its "current liquidity issues" brought about by "unanticipated disruptions" in mortgage credit markets by entering into a letter of intent with Arco Capital Corp. Ltd.

As of Friday, Luminent had outstanding notices of default for unfunded outstanding margin calls totaling about $30.9 million, with $6.1 million of cash being held to complete refinancing, for a net total current need of approximately $24.8 million, according to a company news release.

Arco will arrange for the repurchase of about $65 million in mortgage security portfolios with Luminent. In addition, Arco has been issued warrants to purchase up to a 49% voting equity stake and 51% economic interest in Luminent at an exercise price of $0.18 per common share for a five-year period beginning Aug. 30.

For its part, Luminent will elect four new members to its board and four existing directors will resign. Luminent said going forward it plans to act as a multi-channel manager for asset-backed securities as part of its business strategy.

Future transactions could provide Luminent with access to up to some $60 million in additional capital through repurchase agreements or secured credit arrangements.

"Luminent's board of directors undertook a thorough search for strategic alternatives that could address and resolve Luminent's liquidity issues in the best interests of Luminent and its stockholders," chief executive officer Trez Moore said in the release.

"The board believes that, if implemented, the arrangements proposed by the letter of intent will provide Luminent with short-term liquidity relief and position Luminent to preserve the value of its investment positions."

Luminent is a San Francisco-based real estate investment trust that invests in mortgage-backed securities and loans.

Arco is a San Juan, Puerto Rico, holding company.

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