Luminent Mortgage Capital announced it was being bailed out by Arco Capital, reports Reuters. Luminent will invest $60 million of new capital, buy $65 million in mortgage securities and may buy other company assets as it purchases a 51% economic interest in Luminent at 18 cents per share, a deep discount from where the company’s shares traded on Friday. Luminent suspended its quarterly dividend earlier this month after it received default notices for about $2.3 billion in debt amid trouble in the mortgage securities market.
“The board believes that, even with the possibility of sizeable dilution to existing Luminent stockholders, the transactions proposed by the Letter of Intent with Arco create the best path both to attempt to protect current value and grow potential value going forward,” said Trez Moore, ceo at Luminent. “The board believes that, if implemented, the arrangements proposed by the Letter of Intent will provide Luminent with short-term liquidity relief and position Luminent to preserve the value of its investment positions,”