UPDATE 1-Thornburg gets extension to raise capital

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NEW YORK, March 28 (Reuters) - Thornburg Mortgage Inc (TMA.N: Quote, Profile, Research), a struggling "jumbo" home loan provider, said on Friday that it has received an extension through the end of the month to raise nearly $1 billion of capital to keep five lenders at bay and avert a possible bankruptcy filing.

Earlier this month the company hammered out a 364-day agreement with five of its lenders, which calls for Thornburg to raise a minimum of net proceeds of $948 million in new capital. The original agreement announced on March 19 called for Thornburg to raise the nearly $1 billion within seven business days.

The Santa Fe, New Mexico-based company had previously said its survival was in question after being unable to meet lender demands for more than $600 million of cash or collateral.

Thornburg said the new, 364-day agreement with affiliates of Bear Stearns Cos (BSC.N: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research), Credit Suisse Group (CSGN.VX: Quote, Profile, Research), Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research) and UBS AG (UBSN.VX: Quote, Profile, Research) would reduce margin requirements and free it from further margin calls and other obligations. It said the lenders were providing about $5.8 billion of financing.

The company has said it planned to do so by selling at least $1 billion of subordinated notes that carry a 12 percent interest rate and are convertible into stock at 75 cents per share.

Thornburg also plans to issue warrants to the lenders to buy 47 million shares, and to suspend its dividend for a year.

Thornburg specializes in adjustable-rate mortgages of more than $417,000, which typically go to buyers of more expensive homes. Many investors stopped buying these loans as credit markets tightened. Until recently, mortgage financiers Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) also could not buy them. (Reporting by Ilaina Jonas and Jonathan Stempel; Editing by Alex Richardson)