Countrywide Financial: Bank of America's Deal Of The Century

It is too good to be true. Bank of America (BAC) put $ 2 billion into Countrywide Financial (CFC) by taking convertible preferred with an $18 a share strike price and a 7.25% coupon.

BAC was able to do this on a day when CFC closed a bit over $21 and then the mortgage bank’s shares moved up another 22% after hours. No details of the agreement were filed with the SEC at the time of this writing. It will be interesting to see exactly what rights the preferred shares have.

How much risk for BAC? Very little. The bank should have been able to handle due diligence without Herculean effort because it knows the industry as well as any other large financial institution in the US.

Nice work if you can find it.

Douglas A. McIntyre