Thornburg survival in doubt, sees completing tender

NEW YORK (Reuters) - Thornburg Mortgage Inc TMA.N, a specialist in jumbo home loans, said its survival remained in doubt following additional margin calls, but it is on track to complete a restructuring and avoid collapse.

Chief Executive Larry Goldstone said on Tuesday that the Santa Fe, New Mexico-based company expects to complete an exchange offer next week for some preferred stock that will ensure its survival.

Thornburg specializes in mortgages above $417,000, which often go to buyers of larger homes who have good credit. The company's business model proved vulnerable as investors stopped buying the kinds of loans it makes. Thornburg ended June with $27.2 billion of adjustable-rate mortgage assets on its books.

"Our circumstances are somewhat precarious, to put it mildly," Goldstone said on a conference call. He called financing terms from Thornburg's lenders "onerous," said mortgage securitizations have "come to a screeching halt," and said Thornburg has not been able to restart loan originations.

Thornburg also said in a filing with the U.S. Securities and Exchange Commission that there remains "substantial doubt about the company's ability to continue as a going concern for the foreseeable future."

Late on Monday, Thornburg said second-quarter profit rose to $412.3 million, or 84 cents per share, from $83.4 million, or 66 cents, a year earlier. Shares outstanding quadrupled from a year earlier.

Results reflected a $536.9 million gain tied to its accounting for some liabilities, and a $209.6 million mortgage write-down. Excluding several items, Thornburg said profit was $22.7 million, or about 5 cents per share. The company had in June reported a $3.31 billion first-quarter loss.

In early afternoon trading, Thornburg shares were up 11 cents at 51 cents on the New York Stock Exchange. Their 52-week high is $14.20, set last September 12.

MARKET NOT GETTING BETTER

Thornburg said it has been hurt as credit rating agencies downgrade some of its "triple-A" and "double-A" rated securities, pushing their market value down.

It said it covered $219 million of margin calls on August 21 and may face another $25.9 million of collateral demands.

Goldstone, referring to the mortgage securities market, said: "Whoever thinks it's being fixed and getting better out there, it's not."

Thornburg avoided bankruptcy in March when it won a $1.35 billion rescue from investors including MatlinPatterson Global Advisers LLC, which invests in distressed companies, following other margin calls.

In connection with the rescue, Thornburg agreed to conduct an exchange offer for some preferred stock, in which holders of at least two-thirds of each of four classes must participate.

Though participation by holders of Series F preferred stock had fallen to 68.8 percent on August 22 from 96.2 percent three days earlier (holders can withdraw tenders) Goldstone said, "We believe we have successfully completed the tender offer."

The offer now expires on September 3.

Well over 100 mortgage lenders have stopped lending, been sold or gone bankrupt since the start of 2007.

(Editing by Steve Orlofsky)