Countrywide’s continued bleeding of cash (more than $2.5 billion over the last 3 quarters) has reduced the value of the Bank of America buyout deal by a billion dollars, reports Bloomberg. The original $4 billion bail out is now valued at a $3 billion deal.
The retail branches, servicing portfolio and remarketing opportunity numbers must pencil out at some huge profit number for BofA to put up with the political, publicity and legal nightmare that is Countrywide.
From Bloomberg on the shaky deal:
Bank of America Corp.’s offer for Countrywide Financial Corp., the biggest U.S. mortgage lender, has lost $1 billion, or a quarter of its value since January, as the housing slump points to additional losses for lenders.
After four months of falling share prices, Bank of America’s stock swap is valued at $3 billion, compared with about $4 billion when the deal was announced on Jan. 11. While investors would get stock valued at $5.13 a share, Countrywide trades for 6 percent less. Investors are being scared off by weak home prices and legal risks, said Abigail Hooper, managing director of merger arbitrage hedge fund Havens Advisors.
Bank of America Chief Executive Officer Kenneth Lewis bailed out Countrywide after rising defaults and foreclosures left the Calabasas, California-based lender on the brink of bankruptcy. Bank of America said last month that it may not guarantee all of Countrywide’s debt, increasing concern about a default. A federal investigation into lending practices could disclose more problems, said Hooper.
“If they were to find something that suggested fraud, this company could go into bankruptcy,” Hooper said. “Right now people in the arb community don’t want to take that kind of risk.” Hooper said her New York-based firm has a “small position” in Countrywide.
Countrywide is under federal investigation as to whether officials misrepresented the company’s financial position and quality of its mortgages in regulatory filings, a person with knowledge of the probe said on March 8. In its first-quarter report, Countrywide said it has been told by the Justice Department that the Federal Bureau of Investigation can’t confirm or deny whether a probe is being conducted.
“The investing public is slowly coming to the conclusion that this train wreck was just in the beginning stages,” said Julian Mann, a mortgage and asset-backed bond manager at First Pacific Advisors LLC in Los Angeles, which manages $11 billion. “If I was Ken Lewis, I might be reconsidering this deal. Obviously, the shareholders are not excited.”
Countrywide’s continued bleeding of cash (more than $2.5 billion over the last 3 quarters) has reduced the value of the Bank of America buyout deal by a billion dollars, reports Bloomberg. The original $4 billion bail out is now valued at a $3 billion deal.
The retail branches, servicing portfolio and remarketing opportunity numbers must pencil out at some huge profit number for BofA to put up with the political, publicity and legal nightmare that is Countrywide.
From Bloomberg on the shaky deal:
Bank of America Corp.’s offer for Countrywide Financial Corp., the biggest U.S. mortgage lender, has lost $1 billion, or a quarter of its value since January, as the housing slump points to additional losses for lenders.
After four months of falling share prices, Bank of America’s stock swap is valued at $3 billion, compared with about $4 billion when the deal was announced on Jan. 11. While investors would get stock valued at $5.13 a share, Countrywide trades for 6 percent less. Investors are being scared off by weak home prices and legal risks, said Abigail Hooper, managing director of merger arbitrage hedge fund Havens Advisors.
Bank of America Chief Executive Officer Kenneth Lewis bailed out Countrywide after rising defaults and foreclosures left the Calabasas, California-based lender on the brink of bankruptcy. Bank of America said last month that it may not guarantee all of Countrywide’s debt, increasing concern about a default. A federal investigation into lending practices could disclose more problems, said Hooper.
“If they were to find something that suggested fraud, this company could go into bankruptcy,” Hooper said. “Right now people in the arb community don’t want to take that kind of risk.” Hooper said her New York-based firm has a “small position” in Countrywide.
Countrywide is under federal investigation as to whether officials misrepresented the company’s financial position and quality of its mortgages in regulatory filings, a person with knowledge of the probe said on March 8. In its first-quarter report, Countrywide said it has been told by the Justice Department that the Federal Bureau of Investigation can’t confirm or deny whether a probe is being conducted.
“The investing public is slowly coming to the conclusion that this train wreck was just in the beginning stages,” said Julian Mann, a mortgage and asset-backed bond manager at First Pacific Advisors LLC in Los Angeles, which manages $11 billion. “If I was Ken Lewis, I might be reconsidering this deal. Obviously, the shareholders are not excited.”
WaMu, a bank that I consider one of the most under-discussed potential failure candidates as this credit crisis worsens, reported job cuts for 1,200 positions across the country in an effort to reduce costs and trudge back towards profitability.
WaMu has huge exposure to option ARM loans, with a ton of their profit booked as deferred interest “earned” on those loans and some of the smallest loan loss reserves out of any of the big depositories.
From Market Watch on the layoffs:
Washington Mutual said Thursday that it is cutting 1,200 more jobs as part of the lender’s efforts to reduce costs and return to profitability. More than half of the job cuts — 775 positions — are in California and Florida, two formerly booming real estate markets that have been hit hard by the mortgage crisis. Another 270 positions were reduced in Washington state. The cuts are part of a plan WaMu announced in April to lower expenses by $500 million to $600 million, according to a spokesman at the lender. WaMu already cut 3,000 jobs earlier this year as it closed a series of home loan centers. The job losses announced on Thursday affect back-office and support workers.
WaMu, a bank that I consider one of the most under-discussed potential failure candidates as this credit crisis worsens, reported job cuts for 1,200 positions across the country in an effort to reduce costs and trudge back towards profitability.
WaMu has huge exposure to option ARM loans, with a ton of their profit booked as deferred interest “earned” on those loans and some of the smallest loan loss reserves out of any of the big depositories.
From Market Watch on the layoffs:
Washington Mutual said Thursday that it is cutting 1,200 more jobs as part of the lender’s efforts to reduce costs and return to profitability. More than half of the job cuts — 775 positions — are in California and Florida, two formerly booming real estate markets that have been hit hard by the mortgage crisis. Another 270 positions were reduced in Washington state. The cuts are part of a plan WaMu announced in April to lower expenses by $500 million to $600 million, according to a spokesman at the lender. WaMu already cut 3,000 jobs earlier this year as it closed a series of home loan centers. The job losses announced on Thursday affect back-office and support workers.