Luminent Mortgage Capital said it is considering "a full range of strategic alternatives" as shares lost more than three-quarters of their value after the company warned that it was facing a liquidity crunch amid a high number of margin calls. "Effectively, the secondary market for mortgage loans and mortgage-backed securities has seized up," Luminent said. "As a result, Luminent is simultaneously experiencing a significant increase in margin calls on its highest-quality assets and a decrease on the financing advance rates provided by its lenders." The board also suspended payment of its $0.32 second-quarter dividend. Just last week, Luminent said the dividend "is secure and will not be canceled," and that it had "ample liquidity to manage its business." Luminent said "prime" whole loans made up most of its assets as of June 30, and claimed that its credit process is stringent, saying it independently validates property values on every loan it buys and that as a result of that due diligence it "has experienced lower delinquencies than the prime mortgage market." The remainder of its portfolio, it said, are mortgage-backed securities, "the vast majority of which is rated AAA." UBS downgraded Luminent to "sell" from "neutral" and cut its price target to zero from $9. Luminent said it delayed filing its quarterly report with the SEC. It said it ended June with $9.5B in assets and $9.06B in liabilities on its balance sheet.
Sources: Reuters, MarketWatch
Commentary: Luminent Mortgage Capital May Be On the Verge of Bankruptcy • Luminent Mortgage Capital: Another MREIT Bites the Dust? • A Contrarian Look at the Financial Sector
Stocks/ETFs to watch: LUM. Competitors: NFI, NLY. ETFs: REM
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