Thornburg, counterparties amend override agreement to allow interest payment, margin call relief

By Caroline Salls

Pittsburgh, Dec. 12 - Thornburg Mortgage, Inc. and the counterparties to its override agreement have entered into an amended and restated override agreement that allows for the release of funds in order for the company to make the interest payment on its 8% senior notes that was due on Nov. 15 within the 30-day grace period, according to a company news release.

Thornburg said it made the interest payment on Dec. 12.

Under the amended override agreement, the counterparties agreed not to invoke any margin calls against the company on any financing arrangement to which they are a party during the override period, which expires on March 16.

In exchange, Thornburg has agreed to pay the remaining $110 million out of a liquidity reserve fund to the counterparties, except for $41.2 million that will remain in the fund to make the senior notes interest payment.

The $41.2 million will also cover forecasted operating expenses and debt service payments through March.

"With the successful resolution of this agreement and a continued reprieve from margin calls, we will now be able to focus our complete attention on finding alternative financing solutions for our existing mortgage-backed securities portfolio and on our loan origination business," Thornburg president and chief executive officer Larry Goldstone said in the release.

In addition, the company has also agreed to pay all of the principal and interest collected on the underlying collateral subject to the override agreement to the counterparties to further reduce the outstanding financed balance on an accelerated basis.

Thornburg said it will release all claims for previous period unremitted funds and allow the counterparties to retain those funds to also reduce the loan amounts.

Finally, in connection with the company's obligation to issue additional warrants to the counterparties following the preferred stock tender offer equal to at least 4.04% of the company's outstanding shares, the company has agreed to fix the number of warrants to purchase common stock at 14.18 million shares of common stock and to issue the warrants by Dec. 19 at an exercise price of $0.01 per share.

According to the release, the reverse repurchase agreement counterparties and their affiliates who entered the override agreement with Thornburg Mortgage include J.P Morgan Chase Funding Inc., Citigroup Global Markets Ltd., Credit Suisse Securities (USA) LLC, Credit Suisse International, Greenwich Capital Markets, Inc., Greenwich Capital Derivatives, Inc., the Royal Bank of Scotland plc and UBS AG.

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

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