New Margin Calls Hit Thornburg, Carlyle

Updated from Wednesday, March 5

A rash of margin calls continues to hit mortgage lenders and fixed-income investors, placing jumbo specialist Thornburg Mortgage(TMA Quote) on the brink of collapse.

The company said late Wednesday that its failure to meet a $28 million margin call from JPMorgan Chase(JPM Quote) has triggered a series of defaults on various lending agreements.

The company's obligations under those agreements are "material," Thornburg said in a filing with the Securities and Exchange Commission. The Santa Fe, N.M., lender on Monday already raised the possibility it could go under after nearly $600 million in margin calls since last week.

Carlyle Capital, a fixed-income investment company managed by an affiliate of private-equity firm The Carlyle Group, also said on late Wednesday that it had received a default notice after a run of margin calls. And Swiss investment bank UBS(UBS Quote) reportedly sold off $24 billion in mortgage-backed securities in a "fire sale" that could add to its mounting writedowns, Bloomberg and others reported.

About $320 million was lent to Thornburg by JPMorgan, which notified Thornburg that it planned to exercise its rights under the loan agreement due to the default, which resulted in cross-defaults across other loan pacts.

The announcement comes just two days after the mortgage lender announced a cash infusion involving about $1 billion of prime hybrid adjustable-rate mortgage loans. Thornburg has been burned by nearly $600 million in margin calls over the past month, following the slide in the mortgage-backed securities market.

Analysts have questioned whether a further mortgage sector downturn -- or more failed margin calls - would prompt an eventual bankruptcy filing by the company.

Shares of Thornburg were plummeting 60.6% to $1.34 early Thursday.

Carlyle Capital said it has received $97 million in margin calls since it filed its annual report Feb. 29. Carlyle has failed to meet four of the margin calls and has already received one notice of default and expects at least one more, it said.

Carlyle CEO John Stomber blamed the problem on a "disconnect" on the margin prices for triple-A rated mortgage-backed securities issued by Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote) and the value those securities can fetch on the market right now.

"Unfortunately, this disconnect has created instability and variability in our repo financing arrangements," Stomber said "Management is actively working with the company's repo counterparties to develop more stable financing terms."

Carlyle has sold nearly $1 billion in non-residential mortgage-backed securities since August to improve its liquidity. The Carlyle Group also has provided a $150 million subordinated revolving credit line.

UBS declined to comment on the reports. Analysts, however, believe the bank sold its Alt-A loan portfolio to bond manager Pimco for 70 cents on the dollar, according to Reuters. Merrill Lynch analysts see new writedowns of as much as $21 billion, the wire service reported.

UBS shares were down 1.8% to $30.27.