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Is Thornburg Mortgage Common Really Worth $3.88B?

Thornburg to Lead in Big Home Loans, Goldstone Says (Update1)

By David Mildenberg

April 3 (Bloomberg) -- Thornburg Mortgage Inc., the mortgage company that averted bankruptcy this week, expects to rebound as a leading lender to borrowers of high-priced homes because of backing from its new investors.

``The opportunity to get a jumbo mortgage loan is fairly limited,'' Chief Executive Officer Larry Goldstone said in an interview today, referring to loans of more than $417,000. ``There is minimal to no competition.''

The collapse of mortgage markets left Santa Fe, New Mexico- based Thornburg needing almost $1 billion to meet lenders' margin calls and to avoid bankruptcy. While the company was saved in a $1.35 billion refinancing, the agreement gives the new investors as much as a 94.5 percent stake and an 18 percent initial yield on notes.

``If we were to attract capital, the terms needed to be highly protective of the investors' interests going forward,'' Goldstone said. ``A lot of money has been lost even by investors who thought they were getting in at the bottom in the last six months.''

The new investors include MatlinPatterson Global Opportunities Partners III L.P. and Richard Rainwater, former chairman of Crescent Real Estate Equities Co., according to regulatory filings. Rights permitting new investors to demand changes in operations and replace directors won't preclude his work, said Goldstone, who declined to name other parties who committed capital.

Greater Risks

``Their incentive and their motivation is to try to allow the company to return to some sort of normalcy,'' he said. ``They are looking for much greater than market-based returns because they are taking much greater than market-based risks.''

Thornburg gained 1 cent to $1.30 at 4:15 p.m. in New York Stock Exchange composite trading. The lender has declined 95 percent in the past 12 months.

Thornburg specialized in jumbo loans, which were typically used to buy more expensive homes by people with strong credit. The company will focus particularly on ``super-jumbo'' loans, Goldstone said. Those loans usually are $650,000 or more.

The declining value of Thornburg's holdings triggered margin calls from lenders including Bear Stearns Cos., Citigroup Inc., and Credit Suisse Group. A margin call means a borrower must pledge additional collateral or cash against the outstanding loan.

Five of Thornburg's 10 directors will be replaced with nominees designated by ``certain investors,'' the company said on April 1. It's not clear when those changes will be made, Goldstone said.

To contact the reporter on this story: David Mildenberg in Charlotte, North Carolina at dmildenberg@bloomberg....