Banks
Countrywide Plummets on Deal, Debt Fears
05/05/08 - 04:15 PM EDT
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Fitch Ratings placed Countrywide's debt ratings on "Rating Watch Evolving" and removed the lender from "Rating Watch Positive," as a result of the "uncertainty over the transaction's final structure" and BofA's treatment of Countrywide debt. The move added to the general malaise affecting Countrywide's stock on Monday. "[T]he probability that the transaction is completed remains extremely high," according to a note by Fitch. "However, [BofA] has been unusually silent regarding the ultimate structure of the transaction. "Given [Countrywide's] operating difficulties and the stressed environment, [Countrywide's] ratings would likely be downgraded absent the capital and liquidity support already provided by [BofA], and more likely still if the merger is not consummated," Fitch adds. S&P had lowered its ratings on Countrywide and Countrywide Home Loans Inc. to BB+/B from BBB+/A-2 and Countrywide Bank to BBB/A-3 from A-/A-2. The rating agency cited BofA's May 1 filing, which said it was "evaluating alternatives for the disposition of the remaining Countrywide indebtedness," including "allowing it to remain outstanding as obligations of Countrywide (and not Bank of America)."
A Friedman, Billings Ramsay analyst says BofA should 'walk away' from the deal, due to Countrywide's poor loan quality.
The rating agency is concerned about BofA's commitment to assume the lender's debt obligations after their planned merger.
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