March 25, 2008 / 6:27 AM / 10 years ago

Thornburg amends by-laws in fight for survival

NEW YORK (Reuters) - Thornburg Mortgage Inc TMA.N, which is scrambling to raise nearly $1 billion this week to avoid bankruptcy, said it has changed its by-laws to allow a single investor to buy up to $300 million of stock.

In a filing late Monday with the U.S. Securities and Exchange Commission, Thornburg said its board of directors last week approved a change to allow such an investment, so long as it would not jeopardize the company’s tax-friendly real estate investment trust (REIT) status.

Previously, shareholders were generally limited to a 10 percent ownership stake, Thornburg said.

On March 19, Thornburg announced plans to sell at least $1 billion of subordinated notes paying a 12 percent interest rate and convertible into stock at 75 cents per share.

It said the financing was necessary to ensure that its own lenders would not issue additional margin calls, or demands for cash or collateral, for a year. The Santa Fe, New Mexico-based company said if it did not raise $948 million within seven business days, it might have to seek bankruptcy protection.

Thornburg specializes in “jumbo” adjustable-rate mortgages, which come in amounts of more than $417,000 and typically go to buyers of more expensive homes.

Though such buyers are often good credit risks, many investors stopped buying these mortgages as capital markets tightened. Thornburg earlier this month said it had failed to meet more than $600 million of margin calls.

A REIT may deduct dividends paid to shareholders from its corporate taxable income if it distributes at least 90 percent of the taxable income to shareholders as dividends.

Thornburg shares closed Monday up 14 cents at $1.27, according to New York Stock Exchange data.

Reporting by Jonathan Stempel; Editing by Quentin Bryar

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