Former Thornburg Mortgage's trustee wins OK of proceeds settlement

By Caroline Salls

Pittsburgh, Aug. 28 - TMST, Inc. Chapter 11 trustee Joel I. Sher received court approval of a settlement with collateral agent Credit Suisse Securities (USA) LLC, counterparties and TMST's official committee of unsecured creditors, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Maryland.

The counterparties include Greenwich Capital Markets, Inc.; Royal Bank of Scotland plc; Greenwich Capital Derivatives Inc.; Bear Stearns Investment Products Inc.; Citigroup Global Markets Ltd.; Credit Suisse Securities (USA) LLC; Credit Suisse International; and UBS Securities LLC.

According to the motion, the settlement is related to the collateral agent's security interest in about $78.9 million of sale proceeds generated by the sale and transfer of mortgage servicing rights (MSR) and about $16.9 million reimbursements of advances received at closing on the sale.

Under the settlement, the trustee will transmit $71.67 million to Credit Suisse for the benefit of the counterparties. The settlement amount is equal to about 95% of the MSR sale proceeds, minus an escrowed reserve for the amounts that the trustee seeks to recover in a motion to surcharge.

The trustee will also transmit $20.86 million to the operating account of the debtors, representing an amount equal to 5% of the MSR sale proceeds and 100% of the reimbursements.

TMST, formerly Thornburg Mortgage, is a Santa Fe, N.M., lender specializing in jumbo mortgages that filed for bankruptcy on May 1, 2009. Its Chapter 11 case number is 09-17787.

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