March 3 (Bloomberg) -- Thornburg Mortgage Inc. lost more than half its market value after the home lender failed to meet $270 million of margin calls and a Citigroup Inc. analyst said bankruptcy is possible.

Thornburg fell $4.98, or 56 percent, to $3.92 at 12 p.m. in New York Stock Exchange composite trading. The Santa Fe, New Mexico-based company, which has struggled with falling prices for mortgages since the middle of 2007, may try to raise money by selling debt, equity or securities holdings, according to a statement today.

``Another downturn in the market could lead to significant risk to the company; a more dire turn in the market could lead to bankruptcy,'' Citigroup analyst Donald Fandetti wrote in a note to investors today. Fandetti cut his rating on the stock today to ``sell'' from ``hold'' and slashed his 12-month price target to $5 from $12.

Thornburg, a specialist in ``jumbo'' loans often used to buy more expensive homes, began running short on cash last August, even though the company didn't make subprime loans to people with the weakest credit. The stock's plunge today set a record low and ranked as Thornburg's biggest one-day loss since June 1993, leaving the shares down 84 percent in 12 months.

The company had been predicting a comeback from a $1.1 billion third-quarter loss last year that forced it to suspend lending and the quarterly dividend. Both were later resumed and Thornburg earned $64.8 million in the fourth quarter. Fandetti wrote today that the payout is likely to be cut off again.

Raising Money

The company isn't sure new cash or capital can be raised at acceptable prices, adding that failure may hurt Thornburg's ``ability to continue its business in the current manner.''

Thornburg spokeswoman Suzanne O'Leary Lopez said she hasn't seen Fandetti's report and declined to comment.

The lender expects to be profitable throughout this year, Chief Executive Officer Larry Goldstone said in a Feb. 28 interview. Thornburg said today it previously met more than $300 million of margin calls as of Feb. 27.

The company offers adjustable-rate loans too big to be sold to government-chartered Fannie Mae and Freddie Mac. Thornburg also invested in bonds backed by so-called Alt-A mortgage loans typically made to homeowners with credit scores that are above subprime and below prime.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: March 3, 2008 12:16 EST