UPDATE 1-Friedman cuts target on Thornburg Mortgage stock

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Oct 2 (Reuters) - Friedman Billings Ramsay cut its price target on Thornburg Mortgage Inc TMA.N, saying the uncertainty in its residential mortgage-backed securities portfolio, along with financing risks, will pressure its business model.

The brokerage said disagreements between Thornburg and its lenders on a preferred stock tender offer continues to be a significant risk factor to the company.

Thornburg revised terms of a bailout package on Oct 1 after failing to resolve surprise margin calls from its own lenders. The company was tendering for its preferred stock to save a $1.35 billion rescue it lined up in March.

"The changes in terms for the tender offer provide Thornburg with additional time to negotiate a resolution," Friedman analyst Paul Miller said in a note to clients.

However, Miller expressed concerns about the cash constraints resulting from the retention of the principal and interest payment by the repo lenders.

On the U.S. Treasury bailout plan, Miller believes that the company could benefit from it if implemented in the near term, as $700 billion would increase liquidity for high credit-quality mortgage bonds.

"In anticipation of the passage of the bailout plan by the Treasury in the next few days, Thornburg could potentially benefit from the pricing stabilization," he added.

The brokerage cut its target on the stock to $1 from $2.50 and kept its "underperform" rating.

Friedman Billings said it acted as lead placement agent and financial advisor for the $1.35 billion private placement of senior subordinated secured notes and warrants for Thornburg and earned a fee upon completion of the transaction.

Shares of the home loan specialist closed up more than 74 percent Wednesday on the New York Stock Exchange. (Reporting by Adheesha Sarkar in Bangalore; Editing by Anil D'Silva)