Filed under: Analyst reports, Deals, Bank of America (BAC), Countrywide Financial (CFC), Bear Stearns Cos (BSC)
In January, Bank of America (NYSE: BAC) made a gutsy move when it decided to buy Countrywide Financial (NYSE: CFC). True, it would greatly expand its mortgage footprint, but it would also mean taking on lots of risk.
Of course, since then, the financials went into a swoon. In fact, the US financial system almost imploded because of the Bear Stearns (NYSE: BSC) debacle.
As a result, there’s much skepticism that Bank of America will close its deal, as evident by remarks from an analyst with Friedman, Billings, Ramsey & Co. - Paul Miller - who thinks that Bank of America should forgo the deal.
His belief is that there will be a need for a whopping $30 billion writedown, which would be tough to swallow for Bank of America’s shareholders.
Interestingly enough, there are already signs that Bank of America is getting skittish. Last week, the firm wasn’t clear that it would back Countrywide’s debt. The upshot was that S&P downgraded the debt to junk status.
And yes, in today’s trading, Countrywide’s stock is down 10% to $5.35.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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