Thornburg Mortgage again extends exchange offer, consent solicitation for preferreds

By Jennifer Chiou

New York, Sept. 26 - Thornburg Mortgage, Inc. said it once more extended the exchange offer for its 8% series C cumulative redeemable preferred stock, series D adjusting-rate cumulative redeemable preferreds, 7½% series E cumulative convertible redeemable preferreds and 10% series F cumulative convertible redeemable preferreds.

The offer and a concurrent consent solicitation will now expire at 12:01 a.m. ET on Sept. 30, instead of Sept. 9 and before that Sept. 3. They began on July 23 and have been extended four times.

According to a company news release, 93.6% of the 8% preferreds, 94.9% of the adjusting-rate preferreds, 95% of the 7½% preferreds and 98.3% of the 10% preferreds had been tendered as of Sept. 25.

The company continues to negotiate with the parties to its override agreement about the amount, timing, calculation methodology, limits of margin calls and agreed-upon uses for the liquidity fund. Thornburg Mortgage said it expects a successful clarification of the agreement will allow it to complete the exchange offer by the new deadline.

Previously, the company extended the offer in order to give shareholders time to review its 10-Q report for the quarter ended June 30, which was filed on Aug. 26.

Thornburg is offering $5 in cash and 3.5 shares of the company's common stock for each preferred.

The company said it needed tenders from holders of at least 66 2/3% of the total liquidation preference of each series of its preferreds.

The consents will allow Thornburg to amend its charter to modify the terms of the preferreds. Holders may not tender their preferreds in the exchange offer without delivering consent.

Upon successful completion of the exchange offer, the annual interest rate on the company's senior subordinated notes due 2015 will be lowered to 12% from 18%, resulting in savings of about $69 million per year in interest payments until maturity or until the company's senior subordinated secured notes are earlier redeemed or repurchased.

Because of cash constraints, Thornburg said it has requested a consent from holders of its senior subordinated notes to agree to accept the interest payment due on their notes on Sept. 30 in the form of additional notes. The company added that the notes will continue to bear interest at a rate of 18% per year until the triggering events are satisfied.

Absent improvement in the company's current liquidity position, holders of at least 98% of the $1.15 billion of the senior subordinated notes are being requested to agree to the company's request to forgo the receipt of cash interest. MatlinPatterson Global Investment Advisers and its affiliates, which together hold more than 40% of the notes, have stated that they intend to agree to the company's request.

On July 10, Thornburg said a majority of the participants in the principal participation agreement component of its March 31 financing transaction approved an amendment to change the requirement that the tender offer for the preferreds result in the tender of at least 90% of the total liquidation preference of the company's outstanding preferreds.

Additionally, the company previously said that successful completion of the offer will result in the termination of the principal participation agreement, which would allow the company to retain the monthly principal payments on the mortgage-backed securities collateralizing its reverse repurchase agreement borrowings once the override agreement terminates in March 2009, after deducting payments due under those reverse repurchase agreements.

Questions can be directed to the company (888 310-7466) or the information agent, Georgeson Inc. (866 399-8748).

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

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