Matlin Patterson on the Verge of a Large Rout
Tyler Durden submits:
Even distressed investing legends make horrible decisions. The latest example is Thornburg Mortgage, a single-family residential mortgage lender focusing on "prime and superprime" borrowers, which was saved from bankruptcy last March by a Matlin Patterson-led consortium which executed a global refinancing that saw $1.4 billion of new sub secured notes come in to provide critical operational funding to satisfy margin calls, auction swaps and various other cash needs. Matlin Patterson was a lead investor in the notes with $450 million of capital (out of its MP Global Opportunities Partners III LP fund), and additionally, the company holds 120 million shares of Thornburg stock (which was last trading at $0.04).
At the time of the original investment, on March 19, 2008 Thornburg executed a 364-day override agreement with providers of its reverse repurchase agreements (Bear Stearns (BSC), Citi (C), [[CS]], RBS Greenwich and [[UBS]]). This agreement expired Monday but instead of being forced to seek chapter 11 protection, the company announced it had entered into a short-term forbearance with Override counterparties which expires on March 31. However, the writing on the wall is clear: the company announced it had hired bankruptcy lawyers Kirkland and Ellis and restructuring adviser Houlihan Lokey to help in "discussions with its key constituents, including creditors, current shareholders and prospective new investors, and to help evaluate and implement a recapitalization solution that addresses the issues currently facing the Company."
