This from, appropriately enough, Bloomberg:Thornburg Plans $500 Million of Preferred Stock Sale (Update2)
By Erik Schatzker
Aug. 30 (Bloomberg) -- Thornburg Mortgage Inc., the jumbo- mortgage specialist that was forced to stop making new loans, plans to help relieve a cash crunch by selling $500 million of convertible preferred stock.
The decision follows Countrywide Financial Corp.'s sale last week of $2 billion of similar securities to Bank of America Corp. Mortgage lenders such as Countrywide and Thornburg are turning to costlier financing after being shut out of the short-term debt market.
What's the problem? Their business model depended upon lending money dear and borrowing cheap. That doesn't work anymore. So close up shop already. Anyone want some of Thornburg prefered stock yeilding 10%? There's a way to fix a problem caused by being unable to borrow at 5.25%.
16 comments:
first murst etc
great! where can i get in line for some of this valuable paper?
one of the last acts of desperation?
We'll find out real soon. TMA trading halted on news at 9:45AM EDT. The prefered did trade at 17.50 before the halt.
What's the positioning for the new preferred stock when the bankruptcy is worked out? I mean, if there were a bankruptcy, how well positioned are they with respect to existing bondholders and shareholders?
If this is another securities offering that's "cutting in line" ahead of other stakeholders, it might be worth looking at. Thornburg might actually have some assets with some value on their books--the trick is getting in line ahead of other parties.
I love TMA. I took it short for most of it's drop earlier this month and then long for about half of it's bounce.
Unfortunately, despite a nice pop this morning, it's been trading in a narrow zone lately similiar to CFC - from which I exited my short position yesterday at $19.12 (initiated at $22.60).
Just compared charts of CFC to TMA. Interesting similarities. Also there were huge volumes traded when TMA took a dive.
'The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.'
http://news.yahoo.com/s/csm/asubprime;_ylt=Au1V1wZrR_mviiCi1vv2QxcDW7oF
and some were calling for a recovery in the housing marking in 2008? yeah right.
The boom of the condo crash is loudest in Miami says the Orlando Sentinel.
One of my favorite parts in the piece is where the wife of a married flip-tardian couple concedes defeat:
"It's painful and scary," Natalie Luongo, 31, said. "We saw the frenzy, and we bought in. Now we're paying the consequences."
Now they either walk away from their $117,000 deposit or buy for the agreed-upon price of $585,000 (now rather above market value).
Who "sees the frenzy" and buys in? When the frenzy is in full swing that's when you cash out morons!
Aaron -
this chart is rather handy if a little bit disturbing. The text they've added to indicate where we are in this debacle is telling. 10 months of spiraling hell followed by a tiny lull next Summer where the cheerleaders will tell us the worst is over.
Well then in the fall begins a far more damaging, far reaching and sustained battery of FBs until the whole thing shakes out in Gawd knows what sort of manner.
Resets will be interesting if you'll pardon the bad pun. At least for a few months revebue on market valued resets will rise. OTOH teaser rates have been recorded as if they were paying full rate.s. Everyone one of those that goes bad will cause banks to back out past revenue. The loans that are asset backed and have reliable borrowers are going to refi out leaving the pool on average much worse. The people with the bad loans and no skin are just not going to stick around. The smart guys on the real blogs are missing this part and don't want to hear it. They are busy running impairment models to determine who can be worked out. They don't get it; doesn't matter if the FB can be modified to continue paying, these won't want to make a deal. The timeframe for mods to put FBs in a better position are far far beyond the time horizons of FBs. They'll stop paying $3000/mo and rent for $1500/mo rather than accept $2500/mo that leaves them with zero equity in 7 years.
TMA is up on the news :D .
Hey, maybe if you think about it long enough, that 35% equity dilution is good news for shareholders! Or maybe it's that 10% interest on borrowed money that's being lent out at 8% that's the good news for shareholders. But hey, they made a public announcement that wasn't an announcement of impending bankruptcy--cause for celebration!
@Rob,
Another piece of information that analysts are missing is that many of the borrowers couldn't afford their homes to begin with, even at below-market teaser rates! That's the reason that foreclosures started climbing well before the reset wave hit.
Many, many people got into the largest loan that they could make the payments on, but only for six to twelve months, and only taking savings, outside income, and credit cards into account. The six to twelve months have come and gone, the savings are gone, the credit cards are max'ed out, they're eating ramen noodles and fishing change out of the couch but are still a month behind on payments . . . and then the rate resets.
The people from the mortgage company might come in to try and work it out, but what they'll find is that many of these borrowers couldn't realistically afford the home at 4%, and there's absolutely no way they'll make payments at the market rate of 6.5% (and that's the low market rate.) It's not a matter of how much people are willing to pay, the simple fact is that many of them cannot make the payments at anything resembling a market rate.
So: a) who's the CEO of this company and b) how much of his own stock has he been cashing out lately? and c) has he been golfing with Mozilo?
THORNBURG GARRETT, CEO of TMA
$20m since September. $23.72
Wieird part, those are purchases!
PV,
You are preaching to the choir. I've been singing that song and getting beaten up for it. The only cure for people in houses they cannot afford is obvious but for some reason people just don't want to face it.
SEATTLE ERIC found!!!
http://seattlebubble.com/blog/2007/08/15/tales-of-a-seattle-real-estate-investor-epilogue
For those of you not in the know, this was another pompous ass real estate flipper who had big dreams of being a real estate mogul and decided to blog about his entire journey to financial independence. He had dreams of buying complexes and renting them out, like Serin, he decided to do it in other states, as it gave him more of an air of REAL ESTATE investor if he could brag about having properties in numerous states.
We got to hear his boring details about why this was a good bargain or why it wasn't, the hassles he he had with other real estate agents, and his self serving epilogues about why everything he did was the CORRECT thing to do.
Like Serin, this moron went all in and left a w-2 cushy job to become a real estate agent.
Last that was seen of him until now was him having two pieces of shit that he was trying to unload on the greater fool. It has since been learned that he lost 80K on those two, and he's not done losing money yet. Net profit on 12 flips was 100K. (Yeah right, just like all those people on property ladder ALWAYS made money)
The biggest unexpected boon by far has been the acquisition by [anonymous big tech company] of my old company, [anonymous small tech company]. The purchase price is in the billions. Since I had a ton of stock I held onto (much of it purchased pre-IPO with option prices < 1$), we finally have the financial security that we always wanted, and was one of the reasons we got involved in real estate in the first place.
This last statement is the key...why would this moron have to add this little gem? For the same reason that everyone on property ladder makes money...NOBODY wants to look like an idiot.
"Yeah I lost a ton of money being a greedy asshole..but I'm still rich!"
If you read his blog, maybe cached, you would see him to be total rah rah rah on real estate, a total change from the sentiments expressed in his epilogue.
Quote from Legion's link:
I’m a big picture guy, not a details guy.
Maybe "big picture" people should only be allowed to work in certain jobs where they can't hurt anyone, or maybe not allowed to play with any more than $999 without a grown-up's permission.
You really have to wonder if they'd be happy if their lawyer or surgeon said that to them.
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