Bank of America (BAC) makes strategic investment in Countrywide (CFC)

Posted Aug 22nd 2007 6:17PM by Georges Yared
Filed under: Major Movement, Deals, Industry, Competitive Strategy, Bank of America (BAC), Countrywide Financial (CFC)

Just crossing the news wire is Bank of America (NYSE: BAC) is set to invest $2 billion in Countrywide Finance (NYSE: CFC). The investment will be in preferred stock priced at $18 and carrying a yield of 7.25%. Countrywide is trading up 15%+ in the after market to $26.

This certainly stabilizes CFC from all the rumor mongering that it is in the deepest of trouble. More than likely Countrywide is going to put up a nasty, ugly third quarter, but talk about it going away will cease.

The good news is Bank of America certainly got a good view under the hood and liked what it saw. This move is big and important as this will calm the overall mortgage market. As I wrote the other day, the big, solid banks will be around to pick up market share of the mortgage markets. The big banks will actually have rising earnings primarily coming from the mortgage origination and servicing markets, but probably not until 2009.

More details to follow about this transaction by Bank of America

Georges Yared is the CIO of Yared Investment Research and the author of Stop Losing Money Today.

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Tags: BAC, Bank of America, BankOfAmerica, CFC, Countrywide, inthenews

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Reader Comments (Page 1 of 1)

8-22-2007 @ 6:31PM

Sheldon L said...

There were rumors months ago that BAC might acquire Countrywide. This will stimulate the rumors again.

8-22-2007 @ 8:32PM

InquiringMind said...

Why would CFC want to borrow from BAC at 7.25% when the Fed's disount window is offering at 5.75%?

Convertible at $18 dilutes the value of common stock (today's close = $21.82)

Maybe BAC saw BK under the hood & just wants to get dibs on some of CFC's worthwhile sections (mortgage servicing maybe).

???

InquiringMind

8-22-2007 @ 11:36PM

John said...

This could be the foot in the door for a future acquisition.

8-23-2007 @ 11:54AM

bobbi said...

Being a customer of Countrywide bank for years. I have enjoyed working with them and received a wonderful interest rate on CD's. Something that B of
A would not give to their customers. Therefore, I'm not sure if I want B of A to be part of Country. I am proud that Country has done so well these last couple of weeks. Keep up the good work and to let you know I enjoyed the sweets left at your offices.