T-minus ? until Countrywide goes under.. . .

NEW -> Contingent Buyer Assistance Program
<p>B of A is not going to buy CFC at $18. It is just the conversion price for their holdings. And as of last reporting, Mozillo still holds several hundred thousand shares of CFC.</p>
 
<p>The Tan Man has options at about $ 14.70 as of his last dump in August. Poor guy wont be able to make any money on them soon. He was getting $ 40.00 a share back in May. Tough summer for the Tan One. Well 400 Mil should do well for him and his family. B of A will get the loan servicing when this dog goes "Paws Up". Thats what was up with that 2 Billion "Quicky" loan.</p>
 
BAC will get the whole enchilada for a louse 2 billion. By structuring their deal as convertible preferred they get to go to the head of the line at bankruptcy court and get to pick over the bones first. They will take the servicing assets for a fraction of the cost they would have paid just one year ago. Pure Genius.Capitalism at work
 
That's why I believe no one would dare buy a majority share of Countrywide right now. They'd rather wait until CW has been declared insolvent and filed for BK. At that point, they can buy up the servicing rights of CW's loans for pennies on the dollar
 
Doesn't convertible take a back seat to CFC's bonds? And why would BofA buy a stock for $18 that is on it's way to $3?
 
<p>Debt holders ultimately do not want to operate assets. they will take pennies to any equity guy. If all goes well BAC wins with the interest they get from the preferred. If it all goes to hell in a handbasket BAC will settle the debts and acquire the assets. The gov and ultimately the tax payers will end up with all the trash ala RTC. This has happened before. Made Sam Zell a billionaire</p>
 
Another step down for Countrywide. Stock at $18.18.





<a href="http://biz.yahoo.com/ap/070905/countrywide_job_cuts.html?.v=2">biz.yahoo.com/ap/070905/countrywide_job_cuts.html</a>





B of A got an option to convert its loan either to stock or get paid in assets. That's why B of A got such a great deal. If Countrywide recovers, B of A gets all of its money back plus 7.5 percent interest. If Countrywide goes down, B of A gets it at a bargain price (CFC was trading at around $21 when the deal was made)





<a href="http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_wilson&sid=a8YqqF7CjhFY">www.bloomberg.com/apps/news</a>
 
Morekaos....can you provide a link or some other sort of information on how you derived your rational that BAC will be in first position on all of CFC's assets?





I have never seen a scenario where someone who is holding preferred stock takes a 1st position over all the bond holders. I will agree that bond holders do not want to hold / operate any assets but if those assets can make them whole they will sell them in a heart beat.
 
Awgee....actually wouldn't common stockholders be last in line? I know I know it really doesn't matter at that point b/c nobody is getting diddly squat.
 
B of A is a secured creditor. . .it gets first dibs at the asset that is securing its loans. In this case, B of A gets the first option to buy CW stock at $18.
 
Huh? B of A has the option to buy CW stock at $18 regardless of whether CW becomes insolvent. Read the 8-K and you can see exactly what B of A is getting in return for its equity investment. For one, B of A has a right of first refusal to buy the entire company if a third party makes an offer.
 
Ok so it converts preferred stock into common stock. Still does not put them ahead of bond holders or other creditors.





However, holding that many shares could put them in a position to gain one or maybe two seats on CFC's board. If they could pull that off it would allow them to make "stronger" recommendations on what assets to sell and how to sell them to meet debt obligations.
 
I'm not saying that the $18 option is the only thing B of A gets, it's just one of elements. My feeling is that the $18 price was what B of A valued CW at.





I think that B of A would take the initial hit of the the mortgage losses just to hold on to the other loans that CW has. It's no different than buying a struggling company to get some of its assets. B of A has more than enough cash to weather the housing bust.
 
Marty McFly....that is all they have, either convert stock or first right of refusal. I have not seen anything where they are in 1st position on any assets. If they are please point them out I would love to see.
 
Mino - IIRC, B of A was one of the larger lines of credit CW yanked on recently. I have never seen an extension of a line of credit or a letter of credit issued absent a security agreement secured by hard assets (e.g., real property, cash). So B of A is in this not only with cash infusion, but also as a lender. It may be that the preexisting lending relationship allows them to grab certain assets.





BTW, I love how we're all pontificating without having read the actual dox.
 
Eva.....their is a difference between a line of credit and the issuance of preferred stock. Yes lines of credit are typically secured by hard assets such as RE, IP, Personal Assets...etc and even with warrant kickers. Even though they are secured by hard assets it does not mean they are always in first position on those assets. However, preferred stock is different. Preferred stock has a higher claim on earnings and assets than common shares but are not ahead bond holders and senior creditors.





From everything that I have read, including the filings, BAC has just preferred stock with a 7.5% dividend to be paid out quarterly. They can convert the stock to common stock at $18.00 / share and then have voting rights but then again the dividend they earn is whatever they are paying on common stock.





IMHO...I think BAC is hoping that they can reorganize quick enough and convert their loan operations over to the thrift side of their business. At that point in time I would expect them to convert their shares over to common stock and purchase CFC outright.
 
<p>According to the 8-K BAC is considered a preferred stock holder if the company is sold or insolvent. If they convert they are just left holding the bag.</p>

<p>The servicing side is what they want. It is worth more than the $2bil and I am sure they could work something out with the bond holders if they do go under.</p>

<p>EvaL brings up a good point. BAC has been the underwriter for several of CW's MBS deals and has had their hand in CW since the beginning. I use to have access to the prospectus but for some reason now I don't but depending on what is in there BAC could have a covenant to acquire the deal if they go under. I don't know if they would want it though. The $1bil pool I looked at that is 6 months old already had $50mil in some sort of default. </p>
 
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