While browsing MarketWatch this morning, I found an interesting piece of news. An analyst suggested that Bank of America should just walk away from the Countrywide Financial deal. Obviously Paul J. Miller Jr. is not the first person to make that statement. The rest of the statement is what I found interesting:
“BAC should completely walk away from the CFC deal, as CFC’s loan portfolio will prove a drag on earnings and could force BAC to raise additional capital,” Miller wrote.Shares of Countrywide fell in premarket trading to $5.10 a share, down 14.7%, before recovering slightly in recent trading to $5.40 a share, down 9.7%.Even if Bank of America sticks with the deal, it’s likely that it will cut its offer “down to the $0 to $2 level,” and force Countrywide’s bondholders to absorb the remainder of any write-downs, the analyst said.A Bank of America spokesman wasn’t immediately available to comment.Bank of America offered to acquire Countrywide in January for a $4.1 billion stock swap, which valued Countrywide above $7 a share.
Countrywide’s mortgage loan portfolio continued to deteriorate in the first quarter, and the company reported an $893 million loss. On Thursday, Bank of America said it was under no obligation to support any of Countrywide’s $97.23 billion in debt, prompting credit rating agency Standard & Poor’s to downgrade Countrywide’s debt to junk.”
I’m curious how this will all play out. My opinion, the bid will be revised. I don’t think Bank of America is dying to have Countrywide’s portfolio of loans. I think they want the best loan servicing platform in the world. That’s what they would be buying (again, in my opinion).
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Tyler, I always learn something when I read your blog. It’s very helpful to have someone in the mortgage business give insights, like this. Thank you.