Thornburg Mortgage Liquidating

Bad for Matlin Patterson, but very much as expected. As per a press release from the company, it is formally pulling the plug and shutting down.

The Company expects to file for Chapter 11 bankruptcy protection. The Company also intends to commence an orderly sale or liquidation of its remaining assets assisted by Houlihan Lokey Howard & Zukin Capital, Inc. in order to maximize any remaining value for its bondholders and creditors. Once these sales or liquidations are completed, the Company will discontinue operations.

In addition, the Company will not be able to make the March 31, 2009 interest payment on its Senior Subordinated Notes due 2015 (“Senior Subordinated Notes”). However, the Company has a 30-day grace period in which to make such payment before triggering a default under the Senior Subordinated Notes indenture. Finally, the Company does not expect to file its Annual Report on Form 10-K for the year ended December 31, 2008.

And all this just a year after the big MP-led recapitalization. Not a good IRR on this one for anyone involved. Sphere: Related Content

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Matlin Patterson On Verge Of Large Rout

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, Citi, CS, RBS Greenwich and UBS). This agreement expired yesterday 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 advisor 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."

Additionally, bondholders of the 12%/18% notes apparently agreed to be effectively crammed down proactively in the hopes that new capital will come in: per the press release bondholders have agreed to release liens, as "the Company requested the lien release to facilitate its ability to arrange additional financing in the future."

While Matlin Patterson can likely afford this hiccup on its road to distressed domination, more so than anything, the TMA fiasco is just another example of how easy it is to call a false market bottom and how capital can disappear promptly as a result.

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Update: Matlin Patterson just filed this 13D in which they disclose that bankruptcy of TMA is just a formality at this point:

The Reporting Persons are discussing with the Issuer and certain other constituencies of the Issuer possible restructuring, recapitalization or reorganization transactions (under Chapter 11 of the U.S. Bankruptcy Code or otherwise). There can be no assurance as to whether or when any of the foregoing, or other, transactions will occur.

Sphere: Related Content

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Boutique Bank Mergers Accelerating

Matlin Patterson's pet investment banking project Broadpoint announced it was acquiring another boutique investment bank, Gleacher Partners, for $67 million, consisting of $20 million in cash and $47 million in stock, and will henceforth be known as Broadpoint Gleacher. Gleacher which had long languished in the periphery of even smaller advisory shops, must be happy to cash out its equity ahead of the coming banking extinction wave. Broadpoint has developed over the past 2 years as a melange of bankers and traders poached off from assorted companies, with the majority of its personnel coming from banks Jefferies and Bear Stearns. Broadpoint's CEO, Lee Fensterstock, who for years used to work at Jefferies and became a close friend of David Matlin who runs Matlin Patterson, a hedge fund known to have a special place in its heart (and its building at 520 Madison) for the mid-market focused bank that recently received a Madoff subpoena, became appointed CEO of Broadpoint in 2007 after Matlin decided to take a majority stake in the company. Another close friend of David Matlin's, and also former Jefferies managing director, Tim O'Connor is currently head of Investment Banking/Restructuring after being plucked with his entire team in a lawsuit-laden poaching from even smaller boutique bank Imperial Capital. Due to the implosions of the big banks and the vast preponderance of unemployed bankers, Broadpoint may just be able to assemble a motley crew of cost-effective advisors and traders, case in point being CDS trading legend Rick Crescenzo who joined the company after his prior employer, Bear Stearns didn't quite make the turn. Sphere: Related Content

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