The Countrywide Memo, The Countrywide Vote, And BofA

I'm going to be outside Countrywide headquarters Wednesday as shareholders vote on the mortgage giant's acquisition by Bank of America. The result is a foregone conclusion, but I wonder how many investors will actually show up and how they'll feel about the end of a company which brought them both stunning riches and monumental losses. Countrywide stock closed a year ago at $34.64. Monday it closed at $4.45.

Countrywide's headquarters in Los Angeles.
Mark J. Terrill
Countrywide's headquarters in Los Angeles.

Bank of America's all-stock deal was originally worth $4 billion to Countrywide shareholders, but BofA shares have plunged since, shaving 30 percent off that amount. Still, the agreement to swap each Countrywide share for .1822 of Bank of America stock comes out to around $4.72, a premium to Monday's close.

Countrywide has not granted me permission to be inside the meeting, or even to be on company property. So if you’re coming, look for me out on the sidewalk. If you have something to say about the merger, I'd love to interview you.

I'm also reaching out to anyone still working at Countrywide to confirm the authenticity of an email forwarded to me entitled, “The most important E-mail you have ever received from me!”

It was allegedly sent to Countrywide home loan consultants in the Southwest, and it's quite powerful. If you got it, you know what I'm talking about. If you did receive it and can authenticate it for me, please email me. Send along a paragraph from this “most important email” to confirm we're both looking at the same thing.

Meantime, analysts are weighing in on Bank of America going into the Countrywide vote. Citi says BAC is one of the banks with "the worst capital positions," and it will most likely have to cut its dividend or try to raise capital. Citi estimates that BofA has $72 billion in "outstanding nonagency mortgage securitizations" (i.e., the risky loans), and that Countrywide has $108 billion of them. Put 'em together and you get $180 billion in risky loans still on the books.

Bank of America
Bank of America

Ladenburg Thalmann slashed its outlook for Bank of America, cutting its price target to $39 from $48, but still maintains a Buy. “From my perspective, the stock has been massively oversold,” says analyst Richard Bove, even as he believes there “will be higher loan losses than originally thought.”

Bove says BAC management has only added to the “hysteria” around talk of cutting the dividend by proclaiming the economy is bad. “Enough stockholder wealth has been lost that it is time for management to make a clear statement of its beliefs,” he says. “Bank of America claims to be a 6 Sigma company. While this has done nothing to prevent sizable loan losses, there should be some 6 Sigma ‘Black belts’ at the bank who have a grasp on the company’s potential direction. Ken Lewis has an obligation to his stockholders to define the company’s present status (and not in a private conversation with a limited number of investors).”

Finally, I’ve heard from a lot of people inside Countrywide over the last ten months (ten months! What a year it’s been). Some of you are furious at the way you've seen the company treated by the media, especially by me. Others of you say I don't know the half of it, telling me tales of how often you were overruled while trying to maintain underwriting standards. Whatever the legacy, Countrywide will cease as an independent company July 1st, barring a last minute surprise. Soon, even its name will be gone.

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