Countrywide Rally Cools
Updated from 7:30 a.m. EDT
Countrywide (CFC Quote) rose 6% Thursday, a day after Bank of America (BAC Quote) made a $2 billion investment in the struggling mortgage lender. Bank of America bought $2 billion of nonvoting convertible preferred stock that can be converted into common stock at $18 per share. The preferred shares yield 7.25%. Countrywide was up $1.29 to $23.11 after earlier trading as high as $24.46. The stock had risen as much as 20% in thin trading when the announcement was made late Wednesday. The slackening in the Countrywide runup Thursday came as CEO Angelo Mozilo appeared on CNBC. He scoffed at the notion the lender has been in any danger of declaring bankruptcy, as was suggested last week in a Merrill Lynch note, but stopped well short of saying the mortgage industry outlook has improved. Mozilo says he still "doesn't see a light" even with this injection from BofA. He continues to see panic in locked-up mortgage securities markets. "We believe that in the current turmoil the stock market has been underestimating the value in Countrywide's operations and assets," said Bank of America chief Kenneth D. Lewis. "This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country," he said. "We hope this investment will be a step toward a return to more normal liquidity in the mortgage markets." As of Wednesday's close, Countrywide shares had lost more than half their value this year as the mortgage business has hit the wall following a spike in delinquencies and defaults on risky loans. The news comes a week after Countrywide stock was torched by the company's decision to tap an $11 billion bank credit line. Countrywide borrowed from a group of 40 banks after it was unable to sell mortgage loans into secondary markets to raise cash to fund its lending operations. Bank of America, which has been an oft-rumored buyer of Countrywide over the past year, was up 55 cents to $52.20.- Loading Comments...
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