BAD Injects Capitol Into Countrywide...

16 years ago

"Bank of America, the No. 2 U.S. bank, plans to invest $2 billion in preferred stock issued by Countrywide Financial, a mortgage lender that has faced a liquidity crunch recently, the Wall Street Journal reported on Wednesday."

I'm sure there will be more to follow tomorrow. This is good news though because it will keep Countrywide in the game. I *hate* their CEO but to lose 20% of the country's mortgage lending in one swoop would be tough. Hopefully, BAC will have a little chat with Angelo about those sub-primes....

Tricia

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Comments (8)

quandary
16 years ago
I read that Warren Buffet is looking at Countrywide, too.
triciae
Original Author
16 years ago
Oops! That should have been "BAC"! lol

/t
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mfbenson
16 years ago
Warren Buffet is looking at PIECES of Countrywide... he doesn't want the whole thing. Whatever remains after he's cherry picked the best parts probably won't be solvent for long - unless he pays so much for the parts he takes that the rest has enough money to last a while. But he's notorious for not overpaying.
johnmari
16 years ago
Makes me VERY glad we didn't go with Countrywide for this new mortgage and that the Countrywide mortgage on the old house is going to go away. I don't like to think of my mortgage holder going wobbly. (Yes, I know they wouldn't call in the loan, but I do prefer some stability in the financial institutions with which I have dealings. Call me a coward, I don't mind!) Actually the Countrywide rep told us straight out in early July that he couldn't give us as good a deal as some of the other lenders around since we have a nice high credit score and that we'd be better off going elsewhere - I wonder if he was having some precognition?
chisue
16 years ago
Countrywide and others like it richly deserve to fail. Federal policies that allowed them to exist, unregulated, must change.
mfbenson
16 years ago
"Oops! That should have been "BAC"! lol"

Actually, BofA is the abbreviation I usually see.

bofa... rhymes with sofa??? :)
triciae
Original Author
16 years ago
BAC is their NYSE ticker symbol & I type it automatically...sorry.

Tricia
kec01
16 years ago
Countrywide Gives Bank of America $447 Million Gain (Update3)

By Caroline Salas and Steven Church

Aug. 23 (Bloomberg) -- Bank of America Corp., the second- biggest U.S. lender, is already up about $447 million on its $2 billion preferred stock investment in Countrywide Financial Corp.

This is ``something of a sweetheart deal,'' David Hendler, an analyst at research firm CreditSights Inc. in New York, said in a report.

Bank of America, based in Charlotte, North Carolina, can convert the preferred stock to common shares at $18 each. If the preferred Countrywide shares were swapped for stock at the high today of $24.46, Bank of America would make a $700 million profit. Countrywide, the biggest U.S. mortgage lender, will also pay dividends of 7.25 percent on the preferred shares.

Countrywide, which lost half its market value after peaking on Feb. 2, rose 20 cents, or 0.92 percent, to $22.02 in New York Stock Exchange composite trading.

The deal, announced after the market closed yesterday, was made to help Calabasas, California-based Countrywide weather the global credit rout that had cut off its access to short-term financing. The investment reassured investors after Countrywide was forced last week to draw on $11.5 billion of bank credit lines and Merrill Lynch & Co. raised the prospect that the company may be headed for bankruptcy.

``The only time you see terms like this is if a company is really desperate for financing,'' said Andrea Revy O'Connell, president and chief executive officer of Froley Revy Investment Co., which manages $800 million in convertible bond assets.

`Pretty Rare'

A 7.25 percent coupon on a convertible ``is pretty rare on a company that's investment-grade,'' O'Connell said in an interview from her Los Angeles office. ``I wouldn't mind getting seven and a quarter.''

By comparison, Countrywide in November sold about $1.5 billion of preferred shares that pay a dividend of 7 percent. The debt isn't convertible into shares.

``This transaction goes far beyond the indenture that you're reading,'' Angelo Mozilo, chief executive officer of Countrywide, said in an interview. ``The $18 a share, and the premium and that sort of thing. It's not about that at all. It's about making sure this company is secure for the next 40 years and that our shareholders, our long-term shareholders, are rewarded.''

Countrywide sought a fairness opinion on the deal from Goldman Sachs Group Inc., Mozilo said.

If I had that kind of spare change, I'd have bought Countrywide preferred shares, too.

BAD Injects Capitol Into Countrywide...

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quandary

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BAD Injects Capitol Into Countrywide...

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quandary

triciaeOriginal Author

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triciae
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