Thornburg gets tenders for most preferred stock in exchange offer

New York, Nov. 19 - Thornburg Mortgage, Inc. said its exchange offer and consent solicitation for its 8% series C cumulative redeemable preferred stock, series D adjusting-rate cumulative redeemable preferreds, 7.5% series E cumulative convertible redeemable preferreds and 10% series F cumulative convertible redeemable preferreds expired with the required thresholds being met.

By the expiration at 5 p.m. ET on Wednesday, holders had tendered 89.4%, or 5,834,744 shares, of the series C preferreds; 91.2%, or 3,646,556 shares, of the series D preferreds; 92.1%, or 2,913,110 shares, of the series E preferreds; and 97.9%, or 29,692,293 shares, of the series F preferreds.

All were above the 66 2/3% threshold.

Thornburg will issue a total of 126,260,109 shares of its common stock.

After settlement, Thornburg will have outstanding 690,256 shares of the series C preferreds, 353,444 shares of the series D preferreds, 249,390 shares of the series E preferreds and 634,422 shares of the series F preferreds.

Thornburg previously extended the exchange on Oct. 31, moving back the expiration from Oct. 31. It began on July 23 and has been extended a number of times.

Holders who tendered will receive three shares of common stock for each preferred. Holders were originally slated to receive $5 in cash and 3.5 shares for each preferred, but the offer was amended on Oct. 1.

Normally, the company would need shareholder approval to issue the common stock needed for the offer due to the policies of the New York Stock Exchange. However, the company said any delay caused by first securing shareholder approval would "seriously jeopardize" its financial viability and the exchange offer.

The company has asked the NYSE for approval to use an exception previously granted on April 1, 2008 and has agreed to mail a letter to shareholders notifying them of the plan to issue the shares without their prior approval.

Thornburg must wait at least 10 business days after mailing the letter to issue any common shares in connection with the exchange offer, hence the extension.

'Critical step'

Thornburg previously said that successfully completing the exchange offer was a critical step in its plan to resume normalized business operations because the offer will reduce the interest rate on its senior subordinated secured notes due 2015 to 12% from 18%, which will greatly reduce the cash demands on the company.

In addition, the successful completion of the exchange offer will result in the termination of the principal participation agreement, an agreement that provides to each senior subordinated secured noteholder an interest in the then-unpaid principal amount of a specific portfolio of mortgage-backed securities and rights under any repurchase agreements, reverse repurchase agreements, swap agreements, loan agreements and other agreements as well as other consideration.

The termination of this agreement is also integral to the maintenance of the company's real estate investment trust status, which Thornburg said provides for significant tax savings and higher returns to shareholders during profitable periods.

In the offer, Thornburg was seeking consents to amend its charter to modify the terms of the preferreds. Holders were not able to tender their preferreds in the exchange offer without delivering consent.

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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