Countrywide back up on Buffett rumors; Thornburg shares still off after AAA mortgage portfolio sale

By Sheri Kasprzak

New York, Aug. 21 - Shares of Countrywide Financial Corp. rebounded on Tuesday amid buzz that billionaire investor Warren Buffett may be interested in buying parts of the troubled mortgage lender.

Mortgage lenders in general, according to an analyst, gained in strength on Tuesday because of hopes that the Federal Reserve will cut borrowing costs. Just last week, the Fed dropped the discount rate to 5.75% from 6.25%.

Elsewhere in mortgage-lending news, Thornburg Mortgage Inc.'s stock continued to slide a day after the company announced the sale of $20.5 billion of its AAA-rated mortgage securities portfolio.

In another move in the mortgage sector, Accredited Home Lenders Holding Co. is in talks to sell off $1 billion in mortgage loans to an undisclosed investor.

"The key now is assuring the investors that everything is going to be okay," said one analyst on Tuesday morning. "We are seeing mortgage lenders in talks to sell off some of their assets or make other moves to improve their liquidity position."

Buffett said to be looking at Countrywide

Reports from investors surfaced Tuesday that Countrywide and Buffett are in talks.

The buyout talk sent shares of Countrywide up 9.99%, or $1.98, to close at $21.79 and gaining 15 cents in after-hours trading (NYSE: CFC).

The news comes just a day after Countrywide said it will lay off about 500 employees.

"It's really all speculation and it's hard to comment on speculation," said one sell-side trader. "If it's true, that's great news. I think it could potentially help them correct their liquidity problems."

Another sell-side trader said Tuesday that the stock is still getting lifted by the news, even if it is just speculation.

"It's like a beacon of hope for them," he said. "They're in so much trouble now that any news that could potentially mean a bailout, their stock is probably going to improve."

Last week, Countrywide tapped an $11.5 billion credit facility, the news of which shoved its shares down 10.99%.

On Monday, Countrywide's stock dipped by 7.56%, or $1.62, to close at $19.81 on word that the company would be cutting 500 of its employees. The company released an e-mail internally saying it would begin laying off employees in its Full Spectrum Lending unit, the unit that handles mortgages for customers with minor credit problems.

The lender has been trying assuage customer fears that its banking arm may be in danger.

Thornburg sells assets

In other mortgage-lending news, shares of Thornburg are still down a day after the company said it sold $20.5 billion in its triple-A rated mortgage assets.

The assets were sold at a discount, costing the company $930 million.

Thornburg's stock fell by 41 cents, or 3.04%, to end at $13.09 (NYSE: TMA).

"Yes, the stock is off," said one sell-side trader. "And, yes, investors are bailing out, big time. But I think this is the ideal opportunity to buy. That may sound insane but you can buy TMA at $13. That's about half of the value it was trading at a month ago. Get in now. It seems obvious to me that eventually the shares will rebound. Eventually, it will go up. This is a great opportunity for long investors. It's not something for someone looking to jump in and out."

Luminent shares rise

Another mortgage lender, Luminent Mortgage Capital Inc., watched its stock continue to climb after the company agreed to sell a majority stake to Arco Capital Corp. Ltd.

The stock gained 10%, or 8 cents, to close at $0.88, gaining another 2 cents after hours (NYSE: LUM). The stock climbed by 8%, or 6 cents, to close at $0.81 on Monday after the announcement was made.

Volume also tapered off with 2,503,800 shares traded compared with the average 2,259,360 shares. On Monday, there were 5,419,400 shares traded compared with the average 2,163,710 shares.

Luminent agreed to sell a majority stake to Arco at a 76% discount to market price.

The sale to San Juan, P.R.-based lender holding company Arco comes after eight of the REIT's lenders demanded payment on $1.6 billion in loans following defaults.

Arco received warrants to purchase up to a 49% voting equity stake and 51% economic interest in Luminent, exercisable at $0.18 each for five years, beginning Aug. 30.

Arco also plans to inject $60 million of capital into Luminent and buy $65 million in mortgage assets from the troubled investment firm.

San Francisco-based Luminent plans to elect four new board members and the four existing directors will submit their resignations once those new members are elected.

Accredited's stock climbs

On news that it entered into a deal to transfer $1 billion in mortgage loans to an unidentified investor, Accredited Home Lenders' stock climbed.

The stock gained 11 cents, or 1.71%, to end the session at $6.55 (Nasdaq: LEND), after gaining up to 4% earlier in the day.

The move ensures the company will avoid margin calls - at least for now.

Another mortgage lender, IndyMac Bancorp, Inc. climbed by 8.49%, or $1.76, to close at $22.50, losing 70 cents in after-hours trading (NYSE: IMB).

Agilysys starts self tender offer

Moving away from the mortgage sector, Agilysys, Inc. began a Dutch auction tender offer for up to 6 million shares.

The shares will be purchased at no less than $16.25 and no more than $18.50 per share. The company's closing stock price was $15.63 on Monday.

The tender offer expires Sept. 19 and J.P. Morgan Securities Inc. is the manager of the tender offer.

The offer sent the stock up early in the session, with the shares gaining 60 cents, 3.84%, in pre-market action. The stock went on to gain $2.05, or 13.12%, to close at $17.68 (Nasdaq: AGYS). In after-hours trading, the stock fell another 17 cents.

The tender offer allows shareholders to indicate how many shares and at what price within the range they want to tender.

"The company intends to repurchase tendered shares using cash on hand," said a statement released by Agilysys on Tuesday morning. "Prior to initiating the tender offer, Agilysys had approximately $250 million of cash on hand and no outstanding debt. If the tender offer is consummated in full at $18.50 per share, the company estimates that it will have approximately $150 million cash on hand at $200 million available for borrowings under its credit facility following the tender offer."

The existing cash on hand and the company current credit facility, according to the statement, will be enough to fund both the tender offer and its acquisition strategy.

Connected to the tender offer, the company's board also authorized Agilysys to repurchase up to 2 million additional shares in the open market at or below the $18.50 upper limit of the tender offer, assuming the shares purchased in the tender offer and the open market repurchase does not exceed $150 million.

"The self tender and supplementary open market authorization is a strong signal from our board and management that we are confident in our strategy to reposition the company and focus on selling IT solutions," said the company's chief executive officer Arthur Rhein, in a statement.

"Tendering shareholders will receive an immediate premium to the stock's closing price of $15.63 on Aug. 20, as it stood prior to the tender, and non-tendering shareholders, along with management and directors, will increase their pro rata ownership of the company and our future operations."

Boca Raton, Fla.-based Agilysys is an IT provider.

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