Countrywide Financial(CFC Quote) shares plunged as much as 17% Monday after an analyst suggested that Bank of America(BAC Quote) should "walk away" from the deal.
Friedman, Billings, Ramsey analyst Paul Miller said troubled Calabasas, Calif.-based lender Countrywide faced $20 billion to $30 billion of loan writedowns in a note Monday morning. Similar concerns led rating agency Standard & Poor's on Friday to cut Countrywide's debt to junk status and Fitch Ratings on Monday put the lender's debt on its "Rating Watch Evolving" list.
BofA will "likely renegotiate the transaction down to the $0 to $2 level and force [Countrywide] bondholders to absorb the remainder of the potential writedowns," he wrote. "[BofA] should completely walk away from the [Countrywide] deal, as [Countrywide's] loan portfolio will prove a drag on earnings and could force [BofA] to raise additional capital." ...
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