Thornburg Mortgage, Inc. plans to float up to $1.35 billion in senior subordinated secured notes, as part of a previously announced funding effort designed to keep it out of bankruptcy. The private placement transaction will involve notes with seven-year durations and will carry an interest rate of 18%. The proceeds from the private placement are to satisfy a contingency of the Override Agreement that Thornburg announced on March 19. Under the terms of that agreement, the mortgage lender and investor agreed to raise $948 million in new capital on or before March 27.

In turn, that capital raising effort was part of a 364-day agreement that the company entered into with five of its remaining reverse repos and their affiliates who expect to provide about $5.8 billion of reverse repo financing. Thornburg will also issue warrants to the investors purchasing senior notes in the private placement, each of whom will receive detachable warrants to purchase shares of common stock.

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