Thornburg Mortgage Inc.’s five largest creditors have agreed to give the "super jumbo" lender a one-year reprieve from margin calls if it can raise nearly $1 billion in seven business days.

Thornburg is offering 12 percent interest to anybody willing to buy notes that will mature on April 1, 2015. The notes would be convertible into common stock at 75 percents per share, the lender said in a regulatory filing.

Thornburg had previously disclosed that the company has received $1.8 billion in margin calls this year, of which $610 million were unmet as of March 6 (see Inman News story).

Under the terms of an override agreement Thornburg reached Monday with five creditors, the lender would be able to pay off some of those debts and maintain a $700 million warehouse line of credit that would allow it to continue originating loans.

The agreement requires Thornburg to obtain commitments for at least $1 billion in new capital within three days, and actually raise $948 million of that amount within seven business days.

If Thornburg can raise the money, creditors Bear Stearns Cos, Citigroup Inc., Credit Suisse Group, Royal Bank of Scotland Group Plc and UBS AG will hold off on further margin calls for one year.

If successful, the plan would dilute the value of Thornburg’s stock, but enable it to avoid the forced sale of mortgage-backed securities at a loss to cover its debts.

The agreement covers $5.8 billion of the $7.4 billion of reverse repurchase agreement and commercial paper borrowings outstanding as of March 17, 2008, and the $17.2 billion of auction swap agreements outstanding as of March 6, 2008.


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