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Lenders Thornburg & Accredited File for Chapter 11

NEW YORK (Reuters) – Two large providers of U.S. home loans during the housing boom, Accredited Home Lenders Holding Corp and Thornburg Mortgage Inc, filed for Chapter 11 bankruptcy on Friday, according to court documents.

The San Diego, California-based Accredited is owned by U.S. private equity manager Lone Star Funds, which bought the provider of subprime mortgages in 2007 for $296 million.

The lender will wind down operations, and is looking for a buyer of assets including its servicing business and properties owned through foreclosure, according to a source close to the matter.

“Extremely challenging market conditions” led to the bankruptcy of Accredited, the source said.

Accredited last year tried to revive itself after halting offering loans in August 2007 as the subprime lending market began to unravel. The company resumed making loans after its purchase by Lone Star, and its executives expressed hope that funding from securitizing mortgages into bonds would bounce back.

Accredited listed between $100 million and $500 million in liabilities and between $10 million and $50 million in assets, according to court documents.

It listed HSBC USA NA as its largest unsecured creditor, which it owes $90.8 million. Other large unsecured creditors include Citigroup Global Markets Realty Corp, owed $33.1 million, Goldman Sachs Mortgage Co, owed $21.1 million and Morgan Stanley Mortgage Capital Inc with a $13.2 million unsecured claim.

Thornburg Mortgage (THMR.PK) was once one of the leading providers of “jumbo” home loans, or those for more than $417,000.

It also said it plans to wind down and sell key units.

The company, which said last month it planned to file for creditor protection, had assets of $24.4 billion and debts of $24.7 billion, according to court documents.

Like Accredited, the company struggled with liquidity problems starting in the middle of 2007, when the value of the mortgages on its balance sheet began to fall which eventually led to margin calls by its creditors.

The largest of Thornburg’s unsecured debts was $1.3 billion in outstanding senior subordinated notes. Other large unsecured debts included about $3.7 billion in master repurchase agreements owed to various financial institutions including RBS Global Banking and Markets, Credit Suisse Securities, Citigroup (C.N) and J.P. Morgan (JPM.N).

Thornburg also has $304 million in senior notes outstanding and $213 million in junior notes outstanding.

The company said it wants to sell its Adfitech unit, which provides outsourced services for the mortgage industry, as a going concern, and wind down the rest of its business. It said it has access to about $25 million in unrestricted cash to fund the bankruptcy.

The company has hired law firm Venable LLP as its bankruptcy counsel and investment bank Houlihan Lokey to run the Adfitech sale, according to court papers.

The Accredited case is In re: Accredited Home Lenders Holding Co, US Bankruptcy Court, District of Delaware, No. 09-11516.

The Thornburg case is In re: Thornburg Mortgage Inc, U.S. Bankruptcy Court, District of Maryland, No. 09-17787.

By Al Yoon
(Additional reporting by Jonathan Stempel and Emily Chasan, writing by Tom Hals; Editing Bernard Orr)