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Explanation of Responses:
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1)
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All share figures contained in this Form 4 have been adjusted to reflect Thornburg Mortgage, Inc.'s (the "Issuer")
one-for-ten reverse split of its common stock, par value $0.01 per share (the "Common Stock"), that was effected on
September 26, 2008.
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2)
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On November 26, 2008, pursuant to the Purchase Agreement (as defined below), the Issuer issued detachable Class B Warrants
exercisable for 114,249,521 shares of Common Stock at an exercise price of $0.01 per share (the "Additional Warrants") to
TMA Ltd., an affiliate of the reporting persons. (cont'd)
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3)
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(cont'd) On March 31, 2008, the Issuer raised an aggregate of $1.15 billion from the sale of Senior Subordinated Secured
Notes due 2015 ("Senior Subordinated Notes"), detachable Class B warrants exercisable for 16,860,705 shares of Common Stock
("Initial Warrants") and interests in the Principal Participation Agreement, dated March 31, 2008 ("Principal Participation
Agreement"), in a private placement to qualified institutional buyers under Section 4(2) of the Securities Act of 1933, as
amended, with MP TMA L.P. and MP TMA (Cayman) L.P. and their affiliates (collectively, "MatlinPatterson") as the lead
investor. In addition, $200 million was originally placed in escrow by investors, of which approximately $11.4 million was
withdrawn on June 30, 2008 (the "Escrowed Funds") and the Issuer placed detachable Class B Warrants exercisable into
2,932,336 shares of Common Stock (the "Escrowed Warrants") (cont'd)
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4)
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(cont'd) (prior to giving effect to any anti-dilution adjustments) in escrow with the Wilmington Trust Company on behalf of
such purchasers. Such transaction is collectively referred to herein as the "Financing Transaction."
Pursuant to the Purchase Agreement, for an aggregate purchase price of $433.696 million, MP TMA L.P. and MP TMA (Cayman) L.P.
acquired 5,365,882 and 1,598,303, respectively, of the 16,860,705 Initial Warrants (which have been fully exercised into
shares of Common Stock), their respective rights to receive additional warrants, including the Escrowed Warrants, as
provided in the Purchase Agreement, interests in the Principal Participation Agreement, and $475 million aggregate principal
amount of Senior Subordinated Notes. (cont'd)
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(cont'd) On October 1, 2008, due to failure to satisfy certain conditions in the Purchase Agreement, dated March 31, 2008
("Purchase Agreement") on or prior to September 30, 2008, the remaining $188.6 million of Escrowed Funds was released to the
escrow subscribers and, in connection with the release of the Escrowed Funds, the holders of the Senior Subordinated Notes
became entitled to receive Class B Warrants that had been placed in (cont'd)
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(cont'd) escrow ("Escrowed Warrants"). MP TMA L.P. and MP TMA (Cayman) L.P. received 1,024,161 and 305,061 shares of Common
Stock, respectively, upon the exercise of their Escrowed Warrants on November 19, 2008. The Escrowed Warrants were exercised
at $0.01 per share of Common Stock received for an aggregate purchase price of $10,241.61 paid by MP TMA L.P. and $3,050.61
paid by MP TMA (Cayman) L.P. for the underlying shares of Common Stock. (cont'd)
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(cont'd) Each of the Purchase Agreement, the Warrant Agreement and the Escrow Agreement was filed as an exhibit to the
Issuer's Current Report on Form 8-K/A dated April 4, 2008, and the amendments to each of the Purchase Agreement, the Warrant
Agreement and the Escrow Agreement was filed as an exhibit to the Issuer's Current Report on Form 8-K on July 3, 2008. Each
of these agreements is hereby incorporated herein by reference.
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8)
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As of November 21, 2008, TMA Ltd. was the direct owner of Additional Warrants exercisable into 114,249,521 shares of Common
Stock and each of MP TMA L.P. and MP TMA (Cayman) L.P. was the direct owner of 6,390,043 shares and 1,903,364 shares of
Common Stock, respectively. MatlinPatterson Global Opportunities Partners (Cayman) III L.P. holds approximately 23.0
percent of the ownership interests of TMA Ltd. and TMA (Cayman) L.P. holds the remaining 77.0 percent of the ownership
interests. MatlinPatterson Global Opportunities Partners III L.P. holds 100 percent of the ownership interests in MP TMA
L.P. MatlinPatterson Global Opportunities Partners (Cayman) III L.P. holds 100 percent of the ownership interests in MP TMA
(Cayman) L.P. (cont'd)
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9)
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(cont'd) MatlinPatterson Global Partners III LLC is the general partner of each of MatlinPatterson Global Opportunities
Partners III L.P., MatlinPatterson Global Opportunities Partners (Cayman) III L.P. (collectively, the "Funds"), TMA (Cayman)
L.P., MP TMA L.P., and MP TMA (Cayman) L.P. and, as a result, has the power to vote or to direct the vote, and to dispose or
to
direct the disposition, of the shares of Common Stock and Class B Warrants beneficially owned by TMA Ltd., MP TMA L.P. and
MP TMA (Cayman) L.P. MatlinPatterson Global Advisers LLC (the "Adviser") is the investment adviser to the Funds and TMA
(Cayman) L.P. MatlinPatterson Asset Management LLC holds 100 percent of the voting interest in and equity of the Adviser and
holds 100% of the voting (cont'd)
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(cont'd) interest in MatlinPatterson Global Partners III LLC. MatlinPatterson LLC holds 100 percent of the equity of
MatlinPatterson Asset Management LLC. Each of the reporting persons disclaims beneficial ownership of the shares held by TMA
Ltd., MP TMA L.P. and MP TMA (Cayman) L.P., except to the extent such reporting person holds an indirect pecuniary interest
therein, and the inclusion of these shares in this report shall not be deemed an admission of beneficial ownership of all of
the reported shares for purposes of Section 16 or for any other purpose. (cont'd)
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(cont'd) Effective April 22, 2008, David J. Matlin and Mark R. Patterson were elected as members of the board of directors of
the Issuer pursuant to MatlinPatterson's rights in connection with the Financing Transaction to designate up to three
directors to the board of directors of the Issuer if it meets certain ownership requirements. Subsequently, David J. Matlin
and Mark R. Patterson were elected to the board of directors for three year terms at the Issuer's 2008 annual meeting.
MatlinPatterson retains the right to designate a third director at any time during which it meets the relevant ownership
requirement. David J. Matlin and Mark R. Patterson each is a holder of 50 percent of the membership interests in
MatlinPatterson LLC. David J. Matlin and Mark R. Patterson may be deemed to have shared voting and investment control over
the shares of Common Stock and Class B Warrants held by TMA Ltd., MP TMA L.P. and MP TMA (Cayman) L.P. They also have
indirect (cont'd)
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(cont'd) pecuniary interests in such shares through their indirect interests in a limited partner which holds an investment
interest and carried interest in the Funds. Their exact pecuniary interests therein are not readily determinable because
they are subject to several variables, including without limitation, the internal rates of return of the Funds overall and
with respect to their indirect investment in the Issuer. David J. Matlin and Mark R. Patterson disclaim beneficial ownership
of any of the reported securities except to the extent of their pecuniary interests therein. Each of the aforementioned
MatlinPatterson persons (excluding Messrs. Matlin and Patterson and TMA Ltd. and TMA (Cayman) L.P.) are collectively
referred to herein as "Prior Reporting Persons".
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13)
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On November 19, 2008, prior to the issuance of the Additional Warrants on November 26, 2008, the exchange offer and consent
solicitation by the Issuer in respect of the outstanding shares of its preferred stock expired and the Issuer accepted all
validly tendered shares of preferred stock for exchange. In exchange for the validly tendered shares of preferred stock, on
November 21, 2008, the Issuer issued 126,260,109 shares of Common Stock to the tendering holders. (cont'd)
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(cont'd) As a result, each of the Prior Reporting Persons and Messrs. Matlin and Patterson ceased to be 10% owners of the
Common Stock. However, as directors of the Issuer, Messrs. Matlin and Patterson remained subject to the reporting
requirements under Section 16 of the Securities Exchange Act of 1934. Upon the acquisition by TMA Ltd. of the Additional
Warrants on November 26, 2008, Messrs. Matlin and Patterson once again became 10% owners of the Common Stock, as reflected
in this Form 4. A Form 3 will be filed for each of the Prior Reporting Persons, TMA Ltd. and TMA (Cayman) L.P. with respect
to the acquisition of the Additional Warrants.
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