Will J.P. Morgan Squeeze SPF?
J.P Morgan is one of SPF's bankers. SPF is currently in violation of its loan agreements. It his until March 30th to negoatiate another waiver with its bankers for the fourth time. It appears that bankers are getting much tigher lately. Here is what happened to Thornburg Mortgage tonight:
The Company received a letter from JPMorgan Chase Bank, N.A. (“JPMorgan”), dated February 28, 2008, after failing to meet a margin call of approximately $28 million. The letter states that an Event of Default as defined under that certain Master Repurchase Agreement, dated as of August 3, 2006, as amended on February 7, 2007 by and between the Company and JPMorgan (the “Agreement”) exists. The letter also notified the Company that JPMorgan will exercise its rights under the Agreement. The aggregate amount of proceeds lent to the Company under the Agreement was approximately $320 million.
The Company’s receipt of the notice of an event of default has triggered cross-defaults under all of the Company’s other reverse repurchase agreements and its secured loan agreements. The Company’s obligations under those agreements are material.
SPF owed its revolver and Term A and B bankers approaching $500 million including letters of credit at the end of last quarter. It owed its JV banks $700 million of recourse debt. It had violated its revolver and term A and B loan covenants three times through the end of the year, getting remargin calls on its JV debt, and was granted a temporary waiver until March 30th by revolver bankers.
Will SPF's bankers be as forgiving the fourth time around for a company losing hundreds and hundreds of millions of dollars per quarter and paying its executives millions in bonuses? How tight are banks getting in general? They are cutting off HELOCs. Cutting off credit cards. Cutting off businesses. Cutting off Hedge Funds.
Who is next?