Luminent Agrees to Bailout at 74 Percent Discount

Troubled REIT Luminent Mortgage Capital, Inc. said this morning that it has agreed to a bailout by Arco Capital Corporation at a steep discount: under terms of the agreement, Arco will obtain a five-year warrant to purchase up to a 51 percent interest in Luminent at 17 cents per share. That’s roughly 74 percent off of Friday’s close. In exchange, Arco will repurchase approximately $65 million in mortgage securities. The deal also would provide Luminent will access to $60 million of new capital, according to the press statement. Read the full press statement here. The company said its decision was made quickly, and that it didn’t have time to pursue stockholder approval:

After a careful review, and pursuant to an exception provided in the New York Stock Exchange’s stockholder approval policy, the Audit Committee of Luminent’s Board of Directors expressly approved the decision not to seek stockholder approval for the issuance of Luminent warrants to Arco. The Audit Committee determined that any delay in securing stockholder approval for the warrants could, given the external climate, seriously further jeopardize the financial viability of Luminent. The Exchange has accepted the Company’s application of the exception. Luminent, in reliance upon this exception, is mailing a letter to all stockholders notifying them of its intention to issue the warrants without prior stockholder approval.

Nonetheless, investor reaction to the news seems positive — Luminent stock is up $0.25, or more than 33 percent, this morning.

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