Thornburg to file bankruptcy, discontinue operations; deficiency claim forbearance extended

By Caroline Salls

Pittsburgh, April 1 - Thornburg Mortgage, Inc.'s counterparties have agreed not to act on deficiency claim payment demands through April 30, but the company did not make the interest payment due March 31 on its senior subordinated notes due 2015 and expects to file Chapter 11 bankruptcy and discontinue its operations, according to a company news release.

In exchange for the continued forbearance, the company has agreed that the remaining counterparties who have not previously taken possession of their collateral under their respective financing agreements can do so at their discretion, with the price of the collateral to be determined on a date chosen by the counterparty.

Thornburg said the proceeds from these sales will be used to reduce the outstanding borrowing amount under the financing and ISDA agreements with the counterparties.

According to the release, counterparties JPMorgan Chase Funding, Inc., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets, Inc., Greenwich Capital Derivatives, Inc. and the Royal Bank of Scotland plc have indicated that they plan to take possession of and sell the collateral during the forbearance period.

Meanwhile, counterparties Citigroup Capital Markets Ltd. and UBS AG have agreed not to submit $394 million and $87 million in deficiency claims, respectively, through April 30.

The company said it expects that additional substantial deficiency claims will result as the remaining counterparties sell their respective collateral, but they have agreed not to submit those claims through April 30.

Thornburg said it has also agreed to cooperate with the counterparties to transfer the company's mortgage servicing rights, which were granted to the counterparties as security under their respective financing agreements.

As a result of these events, Thornburg said it expects to file for Chapter 11 bankruptcy and to sell or liquidate its remaining assets with the help of Houlihan Lokey Howard & Zukin Capital, Inc. in order to maximize any remaining value for bondholders and creditors.

Once these sales or liquidations are complete, Thornburg will discontinue operations, according to the release.

Thornburg is a Santa Fe, N.M., lender specializing in jumbo mortgages.

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