Thornburg shareholders approve stock increase; 10-Q filing, preferred consent solicitation up next

By Caroline Salls

Pittsburgh, June 12 - Thornburg Mortgage, Inc. said its shareholders have approved amendments to the company's charter that increase the number of authorized shares of capital stock to 4 billion shares from 500 million, according to a company news release.

The increase in the number of authorized shares is expected to take effect on Friday.

Thornburg said the amendments also remove restrictive covenants from each existing series of the company's preferred stock that currently prohibit the company from purchasing preferred stock when all cumulative dividends on the related series of preferred stock have not been paid in full.

The amendments also remove restrictive covenants that currently keep the company from making the dividend payments on the preferred stock non-cumulative and eliminate all accrued dividends and substantially all voting rights of the preferred stockholders.

"Winning shareholder approval of management's proposals marks a milestone achievement in our efforts to rebuild the company and resume more normal business operations," Thornburg president and chief executive officer Larry A. Goldstone said in the release.

Thornburg said it must still obtain required consents from the holders of each series of preferred stock before the terms of the preferred stock can be amended.

The company said it intends to seek the preferred stockholders' consents in connection with a tender offer.

Before it can make the required Securities and Exchange Commission filings for the tender offer and consent solicitation, the company said it must first file its 10-Q for the quarter ended March 31, which it expects to do shortly.

"We now expect to move forward with the tender offer for all of the company's outstanding preferred stock following the requisite filings with the SEC, which is the next step needed to shore up our liquidity and help us to rebuild a profitable business that can generate shareholder value over the long term," Goldstone said in the release.

Participation agreement extension sought

Thornburg said it is also seeking an extension of time under the principal participation agreement and other agreements related to the issuance of senior subordinated secured notes due 2015, participation interests and warrants, to extend the deadline by which the company is required to complete the tender offer and consent solicitation to Sept. 30 from June 30.

Upon the completion of the tender offer and consent solicitation, the company said it will save roughly $69 million per year in interest payments because the interest rate on its senior subordinated secured notes will be lowered to 12% from 18%.

In addition, Thornburg said the successful completion of the tender offer and consent solicitation will allow the company to cancel the principal participation agreement, which will allow the company to keep the principal payments received under reverse repurchase agreements to reinvest in its business, rather than distributing those payments under the participation agreement.

In addition, three class II directors were elected to three-year terms on the company's 10-member board, including David J. Matlin and Mark R. Patterson, who have both served on the board since April, and Francis I. Mullin III, who has served as a director since January 2001.

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

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