Thornburg Mortgage has announced that it plans to file for Chapter 11 bankruptcy protection and also intends to commence an orderly sale or liquidation of its assets.
Thornburg Mortgage said that JPMorgan Chase Funding (JPM), Citigroup Global Markets, Credit Suisse Securities USA (CSUSA), Credit Suisse International (CSI), Greenwich Capital Markets (GCM), Greenwich Capital Derivatives (GCD), The Royal Bank of Scotland (RBS) and UBS (collectively, the counterparties), have agreed to grant the company additional forbearance from demanding payment on deficiency claims under their various financing agreements through April 30, 2009, or earlier if certain events occur.
In exchange for the continued forbearance the company has agreed that the remaining counterparties who have not previously taken possession of their collateral under their respective financing agreements may do so at the counterparty’s discretion and that the price of such collateral will be determined on a date chosen by the counterparty.
The proceeds from such sales will be applied to reduce the outstanding borrowing amount under the respective financing and International Swaps and Derivatives Association (ISDA) agreements. JPM, CSUSA, CSI, GCM, GCD and RBS have indicated that they intend to take possession of and sell such collateral during the forbearance period. Citigroup and UBS have agreed to continue to forbear on submitting deficiency claims totaling approximately $394m and $87m, respectively, through April 30, 2009, or earlier if certain events occur.
The company expects that additional substantial deficiency claims will result as the remaining counterparties sell their respective collateral under their respective financing and ISDA agreements; however, they have agreed to forbear on submitting such claims through April 30, 2009, or earlier if certain events occur.
In addition, Thornburg intends to sell its other assets, assisted by Houlihan Lokey Howard & Zukin Capital in order to maximise any remaining value for its bondholders and creditors. Once these sales or liquidations are completed, the company will discontinue operations.
