After narrowly surviving a potential bankruptcy at the end of March, ultra-prime mortgage specialist Thornburg Mortgage Inc. (TMA) said Tuesday morning in a filing with the Securities and Exchange Commission that it was back at the edge of bankrupcty again as investors that had initially agreed to hold off have “made a series of unanticipated margin calls and have withheld funds payable to the company.” The Santa Fe, New Mexico-based firm said the margin calls could “greatly diminish” available liquidity and endanger a seemingly never-ending exchange offer for outstanding preferred stock, central to a $1.35 billion rescue lined up in March from MatlinPatterson Global Advisors LLC and other investors. At issue here is an override agreement that saw the firm’s creditor’s hold off on margin calls in March; Thornburg said in the SEC filing that it believed the margin calls to be “in direct conflict” with the terms of the agreement, but it’s pretty clear at this point that the agreements terms are nebulous — either by design, or because the firm and its creditors rushed to put an agreement in place back in March. “Despite its diligent negotiations to date, Thornburg Mortgage has not been able to reach a satisfactory agreement with the Override Agreement counterparties,” the company said in its regulatory filing. “Further, the Override Agreement counterparties continue to withhold virtually all cash owed to the company under both the Override Agreement and its warehouse lines.” Unless outstanding margin calls are resolved, Thornburg warned that it won’t complete the exchange offer — essentially pushing the company into bankruptcy. What’s amazing here is that Thornburg isn’t failing because of rising credit costs per se, or because of a foray into subprime lending; it’s failing because (like many firms) it was leveraged and maintained an investment portfolio of mortgage securities that have quickly headed south as the mortgage market has fallen apart. The company provides/provided so-called ultra-jumbo loans — loans above the conforming limit to borrowers with excellent credit. Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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