Has the Fairy Tale Bank of America / Countrywide Merger Hit a SNAG?

The Institutional Risk Analyst group posted Update: Are Countrywide Financial Bond Holders Bankruptcy Remote?  which suggest that the Bank of America and Countrywide merger may be hitting a snag?  The post is based on an April 30, 2008 draft S-4 filing with the Security Exchange Commission (SEC).  I have provided a snippet from their post below.  The draft filing suggests that Bank of America will refuse to take on responsibility for the $40 billing in debt and may fill bankruptcy for Countrywide.

$40 Billion in DEBT!  BANKRUPCY?  I wonder who the losers are going to be.  You and Me?

On may 1^st, Bank of America did submit their regulatory filing that states they have not decided whether they will honor more than $24 billion in Countrywide debt.  The language by Bank of America in this filing then forced Standard & Poor's Ratings Services to cut Countrywide's corporate debt rating to junk!

Inman reported another alternative to the merger that Bank of America may back out of its planned acquisition of Countrywide Financial Corp. if it can't negotiate a better deal. 

Bank of America reported it still on track to complete their acquisition in the third quarter, 2008.  But Bank of America also revealed Countrywide could be merged into a subsidiary rather than acquired in whole by Bank of America. 

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Here is the snippet from The Institutional Risk Analyst group's article.

On April 30, 2008, Bank of America (NYSE:BAC) filed a draft form S-4 with the SEC describing the formal terms of the offer to CFC shareholders.

BAC S-4 states: "Bank of America has made no determination in this regard, and there is no assurance that any of such debt would be redeemed, assumed or guaranteed," the company said in a filing with the SEC. The clear implication of BAC's refusal to take responsibility for the $40 billion or so in parent-company debt is that BAC CEO Ken Lewis is considering a bankruptcy filing for CFC as one possible strategy after the transaction closes.



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Alan 'AJ' Nisen
Mortgage Loan Officer
Email: aj.nisen@bankofamerica.com
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