[GocartMozart]

wow talk about bend them over. BoA just cashed in big time.

Betting on Countrywide, Counting on Banks

LOS ANGELES (AP) -- Countrywide Financial Corp. share rose nearly 6 percent Thursday, a day after Bank of America Corp. said it would invest $2 billion in the nation's largest mortgage lender.

The investment helps Countrywide as it tries to weather a tightening in the credit markets that has rocked Wall Street and the mortgage industry.
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Shares of Countrywide were up $1.23, or 5.7 percent, to $23.06. Shares of Bank of America rose 25 cents to $51.90.

"Bank of America's investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success," Angelo R. Mozilo, Countrywide's chairman and chief executive, said in a statement late Wednesday.

Under the terms of the deal, Charlotte, N.C.-based Bank of America acquired $2 billion in the form of nonvoting, convertible preferred stock yielding 7.25 percent annually, Countrywide said. The shares can be converted into common shares of Countrywide at $18 per share, with certain restrictions.

If Bank of America were to convert its shares under Countrywide's current share count, it would hold between 16 percent to 17 percent of Countrywide shares, said Robert Stickler, a Bank of America spokesman.

That would make Bank of America the company's largest shareholder. Currently, AllianceBernstein LP owns the most Countrywide shares -- about 63.7 million, or 11 percent of the company -- according to documents filed with the Securities and Exchange Commission.

The deal restricts Bank of America from trading any shares converted from preferred stock for a period of 18 months and from acquiring beneficial ownership of more voting shares in the company.

In a regulatory filing, Countrywide said Bank of America has the right to right to match any offer for the company if Countrywide receives an offer from any third party.

Kenneth D. Lewis, Bank of America's chairman and CEO, said in a statement Wednesday that turmoil in the stock market has led some to underestimate the value in Countrywide's operations and assets.

"This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country," Lewis said.

Analysts said Thursday the $2 billion cash infusion will buy Countrywide some time.

"The $2 billion capital infusion will firm up the company's capital position and allow the company to get through the immediate crisis," Friedman, Billings, Ramsey analyst Paul Miller Jr. wrote in an research note. "We must point out that Countrywide is not completely out of the woods."

Calabasas-based Countrywide said last Thursday it had borrowed $11.5 billion from several dozen banks so it could keep making home loans.

As defaults increased on subprime mortgages to borrowers with shaky credit histories, and the problems stretched to other credit markets, Countrywide's shares plunged, hitting a 52-week low of $15 last Thursday.

The stock rebounded after the Federal Reserve cut a key interest rate Friday. Even with the rally, Countrywide shares have lost about half their value so far this year.

Associated Press business writer Ieva M. Augstums in Charlotte, N.C., contributed to this report.

http://biz.yahoo.com/ap/070823/count...rica.html?.v=6



basically CoutnryWide would have gone bankrupt if they didn't get cash. BoA has tons of cash but can't invest because of antitrust laws limit them to 10% of retail banking business. BoA invests in a different business for 2 billion in what is preferred stock. Meaning that they can convert it to common stock at a premium. The conversion is to $18 dollars a share, while the current stock price is like 23. This added to how depressed the stock has been the last 6 months, and this is just a brilliant buy low sell high move. just brilliant.