Where we left off with Thornburg on August 8, the message from Thornburg insiders was “stay tuned for the end of August.” We’re nearing that time, and according to a press release yesterday, it seems the company might be coming out of the woods. A writer for independent investor site SeekingAlpha summarized the very complex situation well:
First, common shareholders had to agree to the tremendous the issuance of the extra shares and the tremendous dilution that would follow. The measure was approved during the June shareholders meeting. Then the holders of several classes of Preferred Stock shares had to agree to tender at least 2/3 of the outstanding shares in exchange for $5.00 per share (they were issued at $25.00) and 3 shares of the now penny-stock common. If the preferred shareholders did not tender the required 66 2/3% of the shares, Thornburg would have no asset base to continue business. The preferred owners had until August 20 to tender their shares.
Thornburg Mortgage issued a press release to extend the tender acceptance period until September 2, but this note caught my eye (emphasis added):
As of 5:00 p.m., New York City time, on August 19, 2008, holders of Preferred Stock had tendered approximately (i) 88.7% (5,786,035 shares) of the Series C Preferred Stock; (ii) 83.5% (3,340,873 shares) of the Series D Preferred Stock; (iii) 91.7% (2,900,546 shares) of the Series E Preferred Stock and (iv) 96.2% (29,161,031 shares) of the Series F Preferred Stock.
The tender requirement has been met and Thornburg will now have the assets and capital to resume business operations.
Thornburg is a quality jumbo lender with rigorous underwriting standards. They didn’t run into trouble because of defaults and subprime paper, but more because the jumbo mortgage market froze last August and is still frozen. This jumbo market is under served, and Thornburg would be able to capture market share quickly through their wholesale and correspondent sales channels.