Luminent Mortgage Capital Inc. has filed for bankruptcy protection.
The Philadelphia-based company filed for relief under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the District of Maryland, Baltimore Division on Friday, a press release today said.
The filing was preceded by the execution of a plan support and forbearance agreement with secured creditor Arco Capital Corporation Ltd., WaMu Capital Corp. and all convertible noteholders.
In August 2007, Arco provided $65 million to help Luminent meet margin calls. In return, it was given the option to buy up to 49 percent of Luminent's voting shares and up to 51 percent of Luminent's economic interest.
Under the plan outlined today, the equity of existing common shareholders and subordinated creditors will likely be wiped out.
"The dramatic disruptions in the mortgage industry resulted in significant declines in the value of the company's mortgage assets," the statement said. "Although we made progress, we do not have sufficient cash flow to satisfy the Company's legacy liabilities."
In July, Luminent announced it would suspend all payments to unsecured creditors. In June it warned the recent sale of much of its mortgage-backed securities portfolio had placed a significant strain on its projected portfolio cash flow.