Thornburg Has $300 Mln Margin Calls, Shares Sink
By Jonathan Stempel
NEW YORK (Reuters) - Thornburg Mortgage Inc said it has faced more than $300 million of margin calls in the last two weeks after the mortgage market deteriorated suddenly, and might need to sell more assets if conditions worsen.
Shares of the lender traded down $1.63, or 14.1 percent, at $9.91 in afternoon trading, after earlier falling as much as 22 percent to $9.00. Chief Executive Larry Goldstone said in an interview the lender expects to keep paying its dividend.
Like many financial companies, Thornburg TMA.N has suffered as the housing slump and tight credit conditions caused investors to stop buying many securities they no longer consider safe. These include a wide range of mortgage securities that still retain high credit ratings.
In its annual report filed Thursday with the U.S. Securities and Exchange Commission, Santa Fe, New Mexico-based Thornburg said it was forced to post more collateral after $2.9 billion of securities backed by below-prime "Alt-A" mortgages lost 10 percent to 15 percent of their value this month.
Thornburg said the securities carry "triple-A" ratings, but became less liquid after a "sudden adverse change" in the market on Feb. 14, when Swiss bank UBS AG (UBSN.VX) announced a $2 billion write-down on $26.6 billion of Alt-A exposure.
While Thornburg said it has yet to realize losses, it said it might "selectively" sell assets if it falls short of cash to meet future margin calls.
Thornburg concentrates on adjustable-rate jumbo mortgages, which are home loans above $417,000. The $2.9 billion of securities represent 8 percent of the $35.4 billion of adjustable-rate mortgages on its balance sheet at year-end.
"For bond prices to fall 10 or 15 percent on triple-A-rated mortgage securities is clearly aberrational," Goldstone said in the interview. "The issue we disclosed today is not a credit performance issue, but a securities price issue. It's a lot more about market psychology and confidence than anything else."
Alt-A mortgages often go to people who cannot fully document income or assets. They fall between prime and subprime in quality. Many lenders have said losses once concentrated in subprime mortgages have spread to higher quality home loans.
Last summer, Thornburg scrambled to sell $21.9 billion of home loans as markets tightened, causing a $1.08 billion third-quarter loss.
It suspended its quarterly dividend because of these problems, but reinstituted a 25-cents-per-share dividend in December, and posted a $64.8 million fourth-quarter profit.
In the SEC filing, Thornburg said it remains "optimistic over the longer term," and that the credit quality of its loan portfolio is consistent with its reserves for bad loans.
"From an earnings perspective, we will have a very strong year, and the dividend should be safe," Goldstone said.
Analysts on average expect 2008 profit of $1.48 per share, according to Reuters Estimates.
In January, Legg Mason Capital Management said it doubled its stake in Thornburg to 9.08 percent, while real estate and energy investor Richard Rainwater disclosed a 5.5 percent stake.
(Editing by Jeffrey Benkoe, Phil Berlowitz)
