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Countrywide Gets $2 Billion Lifeline

Bank of America Cash Infusion to Help Lender Weather Credit Crunch

By ALEX VEIGA,

Posted: 2007-08-23 08:29:55

LOS ANGELES (Aug. 23) - Countrywide Financial Corp. said Bank of America Corp. made a $2 billion investment in the company Wednesday as the nation's largest mortgage lender tries to weather a credit crunch that's rocked Wall Street and the mortgage industry.

"Bank of America's investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success," Angelo R. Mozilo, Countrywide's chairman and chief executive, said in a statement.

Under the terms of the deal, Charlotte, N.C.-based Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually, Countrywide said. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions.

If Bank of America were to convert its shares under Countrywide's current share count, it would hold between 16 percent to 17 percent of Countrywide shares, said Robert Stickler, a Bank of America spokesman.

That would make Bank of America the company's largest shareholder. Currently, AllianceBernstein LP owns the most Countrywide shares - about 63.7 million, or 11 percent of the company - according to documents filed with the Securities and Exchange Commission.

The deal restricts Bank of America from trading any shares converted from preferred stock for a period of 18 months and from acquiring beneficial ownership of more voting shares in the company.

Countrywide shares jumped more than 20 percent to $26.25 in after-hours trading. Before Countrywide's announcement, the shares had closed the regular session up 3 cents at $21.82.

Kenneth D. Lewis, Bank of America's chairman and CEO, said in the statement that turmoil in the stock market has led some to underestimate the value in Countrywide's operations and assets.

"This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country," Lewis said.

Calabasas-based Countrywide said last Thursday it had borrowed $11.5 billion from several dozen banks so it could keep making home loans.

As defaults increased on subprime mortgages to borrowers with shaky credit histories, and the problems stretched to other credit markets, Countrywide's shares plunged, hitting a 52-week low of $15 last Thursday.

The stock rebounded after the Federal Reserve cut a key interest rate Friday. Even with the rally, Countrywide shares have lost about half their value so far this year.

Shares of Bank of America, which rose 35 cents in regular trading Wednesday to $51.65, gained another 1.9 percent to $52.63 in after-hours trading.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2007-08-22 18:03:09

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88 comments

REXROADTRUCKER69 11:05:00 PM Aug 23 2007

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yeah i should charge more for my one bedroom house, screw them low wage bastard right roses300.

REXROADTRUCKER69 11:03:00 PM Aug 23 2007

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maybe we should only rent to rich people.

REXROADTRUCKER69 11:02:00 PM Aug 23 2007

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how much is the miniumim wage?

roses300 10:12:48 PM Aug 23 2007

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I am a landlord in the country. People want a $750/mo house for $400/mo. A 720 S/f trailer with ch/a is not good enough for them. We are in the country, but what do you expect for $400/mo? All I can offer is a clean,decent place to live in the country. I have heard all the horror stories of ARM'S, but they want a $750/mo house for less than $400. A rent trailer isn't good enough for them. People who never should have gotten a loan are finally having the chickens come home to roost, (Sorry, an old Arkansas saying) Bill

gnpenley 05:26:52 PM Aug 23 2007

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Listen to the ads Countrywide, and others, put out on TV. If it sounds too good to be true, it probably is.

eigle22529 04:39:21 PM Aug 23 2007

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Ah, yes! Another someone with a Rock and a Glass House: wont get a quartrer... What the Hell were you trying to spell?

FourVegasOne 03:57:00 PM Aug 23 2007

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The real players in this market have their thoughts focused years ahead of the current conditions. BofA has seemed to make a move ahead of the inevitable environment resulting in only the biggest and well funded banks controlling the mortgage industry after the dust has settled. Don't be surprised at the number of lenders "approved" by the government in some form or fashion to do loans 2 or 3 years from now. Think our choices are limited now?

lakearcher 03:45:56 PM Aug 23 2007

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marcellarose: YOU MUST HELP YOURSELF. THERE IS NO GOD !

blincoes 03:43:39 PM Aug 23 2007

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why do so many of you morons insist on showing your ignorance not only by what you write, but how you spell it! Would you mouth breathers please learn how to spell. Oh and by the way you dorks do know that the corporations have real hard working mostly good spelling americans working for them. There is no giant evil Mr. Corporation that is screwing everyone. These people are your neighbors. And if you are making 30000 a year you should lower your sights a little because if that is your debt ratio you wont get a quartrer for the cheese on a whopper from anyone.

brittishbiker 03:00:58 PM Aug 23 2007

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Here is the real problem. American hard worker makes under $30k/year Avg mortage with escrow about $24k. They get loans anyway. cause loan companies dont want to go out of buisness.All the good jobs are gone now they are low paying jiobs in Chinna ....news flash magoo.....these chineese auto workers wont get a mortage , Nor will their mexican counter part. they wont buy cars ethier and that market will crash then they wont even have need to work. We wont have jobs ethier . But it wil take a long time for warren buffet and sliim colemen to go through there billions of dollars. Maybe they can buy our vitial organs and live forever and we will have money for a loaf of bread....BRING AMERICA BACK !

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88 comments