Mortgage Lender Changes Bylaws to Avoid Bankruptcy
Attempting to raise nearly $1 billion this week in order to avoid bankruptcy, Thornburg Mortgage Inc on Monday announced that it has changed its by-laws to allow a single investor to buy up to $300 million of stock.
Thornburg, in a filing late yesterday with the U.S. Securities and Exchange Commission, 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.
The Santa Fe, New Mexico-based company 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. It 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.
Published on March 25, 2008
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