- Jumbo mortgage lender Thornburg Mortgage Inc. said Monday it may be forced out of business as it faces an additional $270 million in margin calls on top of the more than $300 million it was being forced to repay, or provide more collateral for, last week.
- Thornburg said it has not met the majority of the most recent calls, but is working to repay them by selling assets or through the raising of additional debt or capital. If Thornburg is unable to meet the current calls, it said the result could materially affect its ability to continue to operate.
- Thornburg said the margin calls are "strictly a result of the continued deterioration of prices of mortgage-backed securities precipitated by difficult market conditions." The calls are not reflective of the actual performance of the securities, the company added.
- Thornburg said Thursday in a regulatory filing it was the subject of margin calls earlier in February on a portfolio of securities backed by alt-A mortgages. It was able to meet all those margin calls without having to sell any assets or raise new capital.
This is essentially akin to a run on a bank... worried investors see what happened last week and panic, and a death spiral ensues. At this point, I am simply going to hold on with this substantial loss, and see where things go - it would be ironic if all these junky home builders who are on death's door are not forced into bankruptcy but TMA was - which is actually run by solid management. We'll see how it plays out but multiple lessons here... I stayed away from the siren calls of anything financial for a long time, but took a risk here, and am losing big time; and don't try to be too cute and go for the home run. Because you can strike out.
Long Thornburg Mortgage in fund; no personal position
3 comments:
Down over 55% so far - OUCH!!!
I would be highly skeptical on your fund if you had no downfalls. This proves you a mortal and can make mistakes. Keep up the good job. You will make for a good fund manager.
Mortality is highly overrated hah. With nearly 60 positions it's bound to happen eventually; thankfully it was a 2% position instead of a 6% position. But still prefer immortality.
Talk about bad luck, of all the "financial/housing" stocks I happen to pick the one that implodes - after hammering the sector for months on end. Shows me.
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