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NEW YORK (Reuters) - Thornburg Mortgage Inc THMR.PK, a large and troubled provider of "jumbo" mortgage loans, on Tuesday said it may file for Chapter 11 bankruptcy protection.
The Santa Fe, New Mexico-based company has struggled with liquidity problems since the summer of 2007, when the value of mortgages on its balance sheet began to tumble. Thornburg later suffered a series of margin calls from its own creditors.
A bankruptcy filing would make Thornburg one of the largest U.S. mortgage providers to seek protection from creditors since the housing slump began, joining rivals such as Washington Mutual Inc WAMUQ.PK and IndyMac Bancorp Inc IDMCQ.PK.
Thornburg has specialized in making mortgages larger than $417,000 to borrowers with good credit, but it ran short of capital as investors stopped buying its loans. It has stayed alive mainly through a series of agreements to restructure or otherwise delay paying its debts.
In a Tuesday statement, Thornburg said it is evaluating strategic alternatives to restructure its financing agreements, make deferred payments, and meet obligations to bondholders.
The company said it hired the law firm Kirkland & Ellis LLP and the restructuring firm Houlihan Lokey Howard & Zukin Capital Inc as advisers. It also said several of its own lenders have agreed through March 31 not to exercise their rights under various financing agreements.
Last March, Thornburg arranged a $1.35 billion bailout from the distressed debt investor MatlinPatterson Global Advisors LLC and other investors to stay out of bankruptcy.
According to a Tuesday regulatory filing, MatlinPatterson surrendered all of its Thornburg common stock -- 120.8 million shares -- on March 12 and 16 without any compensation. The firm's principals, David Matlin and Mark Patterson, resigned from Thornburg's board of directors on March 12, citing potential conflicts of interest.
Thornburg spokeswoman Suzanne O'Leary Lopez said MatlinPatterson will retain a role in the restructuring. "March 31 really is the time frame in which we are working with all of our constituencies on our restructuring plan," she said.
MatlinPatterson did not immediately return a call and e-mail seeking comment.
In a November regulatory filing, Thornburg said it lost $2.75 billion, or $85.71 per share, in the first nine months of 2008. It ended September with $25.4 billion of adjustable-rate mortgage assets on its balance sheet, and liabilities that included $20.4 billion of collateralized mortgage debt.
Shares of Thornburg were down 1.55 cents at 2.85 cents in afternoon trading on the Pink Sheets. Their 52-week high is $32.00, set last March 18.
Reporting by Jonathan Stempel; editing by John Wallace