...[T]here is substantial doubt about the Company’s ability to continue as a going concern without significant restructuring and the addition of new capital. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s available liquidity to meet margin calls resulting from changes in the fair value of its purchased ARM assets collateralizing reverse repurchase agreements and the continued availability of financing for its ARM assets.
The Company had readily available liquidity of approximately $580.0 million at December 31, 2007. Through the close of business on March 6, 2008, the Company had received $1.777 billion in margin calls since December 31, 2007 and had satisfied $1.167 billion of those margin calls primarily by using its available liquidity, principal and interest payments, and proceeds from the sale of assets. As of the close of business on March 6, 2008, the Company had outstanding margin calls of $610.0 million which significantly exceeded its available liquidity at that date.
Also through the close of business on March 6, 2008, the Company had received notices of event of default under reverse repurchase agreements from four different lenders. The Company’s receipt of the notices of events of default has triggered cross-defaults under all of the Company’s other reverse repurchase agreements and its secured loan agreements, and the related lenders could declare an event of default at any time. The Company has been in continuing discussions with all of its lenders, and, to the best of its knowledge, the lenders that issued notices of event of default have not yet exercised their rights to liquidate pledged collateral.
The Company is working to meet all of its outstanding margin calls within a timeframe acceptable to its lenders, through a combination of selling portfolio securities, issuing collateralized mortgage debt and raising additional debt or equity capital. Since December 31, 2007 and through the close of business on March 6, 2008, the Company reduced its portfolio of ARM assets financed with recourse financing by approximately $4.6 billion, of which $1.9 billion has been permanently financed, in order to reduce its exposure to margin calls. The Company has also raised $488.0 million in equity capital since December 31, 2007 and seeks to raise additional capital in order to provide a more stable base of liquidity during an expected period of difficult market conditions for at least several months.