Thornburg Mortgage Inc. has reported that one of its lenders will begin liquidating some of its assets because the company defaulted on a credit line — triggering cross-defaults with other lenders.
A letter dated Feb. 28 was sent by JPMorgan Chase Bank N.A. to Thornburg indicating an event of default had occurred on a reverse repurchase agreement dated Aug. 2, 2006, according to a Form 8-K filing with the Securities and Exchange Commission yesterday. The amount of that agreement was around $320 million.
The event was triggered by Thornburg’s failure to meet a $28 million margin call after securities it holds that are backed by Alt-A mortgages declined between 10 percent and 15 percent in value. The real estate investment trust reported Monday that although it had met $300 million in margin calls since Feb. 14, it faced another $270 million in margin calls on its reverse repurchase agreement borrowings outstanding as of Feb. 29.
Meeting last month’s margin calls left Thornburg strapped for case, and the company warned that its inability to meet the latest round of margin calls “would have a material adverse effect on the company’s ability to continue its business in the current manner.”
In its Feb. 28 letter, JPMorgan told the Santa Fe, N.M.-based company it “will exercise its rights under the agreement.”
“The company’s receipt of the notice of an event of default has triggered cross-defaults under all of the company’s other reverse repurchase agreements and its secured loan agreements,” the SEC filing stated. “The company’s obligations under those agreements are material.”
Liquidity Crisis at Thornburg
Jumbo mortgage lender Thornburg Mortgage Inc. warned today it is facing margin calls that could materially impact its ability to carry on.
Alt-A Liquidity Worsens
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