.crazylegs..

Thornburg Mortgage Must Sell Its Soul to Stay Afloat

sell your common and buy these new notes if you are interested in still investing in TMA at all. you get detachable warrants for free with the initial purchase of the notes AND they are convertible to equity if they survive. you also (theoretically) get the 12% interest payments (or a potential 25% interest rate if the company cannot get shareholder approval of the increase in authorized shares out)

the conversion of these notes would dilute the current common equity by 500%. ouch. this is known as a cramdown. they cram equity down your throat for free but the company survives.

the only problem though is that these notes are subordinated to significant senior debt so depending on the ultimate asset quality and haircuts etc on repos, you could be made whole on these notes if there are any assets left in a bankruptcy scenario.

if their asset quality holds up (avg annual income of borrower is $400k, avg ltv of 65%, FICO 740ish AND most importantly .55% delinquency rate) and they can satisfy the many requirements, then this could be an interesting gamble.

so if you must, buy the notes and you might get lucky.