Bank Of America: Default on Countrywide Debt?
Bank of America, #2 U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial debt, increasing the likelihood of a default.
Countrywide's finances have worsened since the merger announcement because of falling house prices in California, which accounts for about 40% of its lending.
Found in a BofA SEC regulatory filing: "There is no assurance that any such debt would be redeemed, assumed or guaranteed."
Countrywide debt included $11.5 billion in credit lines at the end of 2007 and $47.7 billion in advances from the Federal Home Loan Bank Board.
BofA said the credit lines will be paid when the merger is completed, while the advances will remain outstanding.
The remaining debt, about $38.1 billion, would equal about 2.4% of the bank's total liabilities at the end of last year.
Countrywide bond holders such as Capital Research & Management Co., with $630 million worth, are "collectively" holding their breath.
UPDATE: S&P lowered Countrywides debt rating to below investment grade. The revision reflects:
"the new level of uncertainty as to the ultimate legal status of Countrywide's creditors."
Hattip to Bloomberg.
Countrywide's finances have worsened since the merger announcement because of falling house prices in California, which accounts for about 40% of its lending.
Found in a BofA SEC regulatory filing: "There is no assurance that any such debt would be redeemed, assumed or guaranteed."
Countrywide debt included $11.5 billion in credit lines at the end of 2007 and $47.7 billion in advances from the Federal Home Loan Bank Board.
BofA said the credit lines will be paid when the merger is completed, while the advances will remain outstanding.
The remaining debt, about $38.1 billion, would equal about 2.4% of the bank's total liabilities at the end of last year.
Countrywide bond holders such as Capital Research & Management Co., with $630 million worth, are "collectively" holding their breath.
UPDATE: S&P lowered Countrywides debt rating to below investment grade. The revision reflects:
"the new level of uncertainty as to the ultimate legal status of Countrywide's creditors."
Hattip to Bloomberg.
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