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BofA Affirms Plan to Buy Countrywide Financial
By Reuters | 05 May 2008 | 06:12 PM ET
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Bank of America said on Monday it remains committed to acquiring Countrywide Financial as planned in a bid to dampen speculation it might abandon the $4.1 billion purchase or change the terms.

Bank of America
Nell Redmond / AP
A Bank of America branch.

"The transaction is on track to close, as agreed to in the third quarter," Bank of America spokesman Bob Stickler said.

Countrywide stock [CFC  Loading...      ()   ] fell 10.4 percent on Monday after Friedman Billings Ramsey analyst Paul Miller downgraded the largest U.S. mortgage lender to "underperform" from "market perform," and recommended Bank of America "completely walk away" from the merger.

Miller said Bank of America [BAC  Loading...      ()   ], the second-largest U.S. bank, could face up to $30 billion of loan write-downs if it completes the purchase, hurting earnings and perhaps forcing it to raise more capital.

He cut his price target for Countrywide to $2 per share from $7.

Stickler also said Bank of America has yet to decide whether it plans to back Countrywide's debt.

Last week, the bank said in a regulatory filing it was examining options, including whether to redeem, assume or guarantee the debt.

That led Standard & Poor's to downgrade Countrywide's credit rating to junk status, citing concern about how much debt Bank of America plans to support.

Miller said the Bank of America filing was "most likely the first step in renegotiating the entire deal." Bank of America shares closed Monday down 82 cents at $38.97, while Countrywide shares fell 62 cents to $5.36, both on the New York Stock Exchange.

The merger calls for the exchange of 0.1822 of a Bank of America share for each Countrywide share.

Based on that ratio, Countrywide shares should be worth $7.10 each, but they closed 25 percent below that level.

The lower price may reflect expectations that Bank of America will cut the purchase price.

Copyright 2008 Reuters. Click for restrictions.

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