Countrywide Financial seeking another bailout, NYPost says

Countryslide

By Zachery Kouwe
New York Post
Tuesday, September 11, 2007

http://www.nypost.com/seven/09112007/business/countryslide.htm

Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation's largest home lender continues to struggle amid the global credit crunch and declines in the housing market, the Post has learned.

Sources familiar with Countrywide's plans said the lender continues to work with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to structure another strategic investment similar to the deal Bank of America struck last month.

It's unclear at this point who exactly is involved in the investment, but sources said a group that could include J.P. Morgan and Citigroup as well as several hedge funds has expressed interest in Countrywide.

A final deal could be announced by the end of the month, sources said.

Last month Bank of America paid $2 billion for a new series of non-voting preferred stock in Countrywide, which provides an annual dividend of 7.25 percent and can be converted into common stock at $18 per share. As part of the deal, Countrywide left the door open to issue additional preferred stock or convertible preferred stock.

"Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them," said one source familiar with the company.

Countrywide's chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said recently that interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales and warned that the U.S. economy is headed for a recession.

"The issues the economy is facing are worse than most people believe," Mozilo said in an interview last Friday with Bloomberg News. Mozilo has been pushing for the government to allow Fannie Mae and Freddie Mac to finance bigger home loans.

Countrywide, which handles one of every five new U.S. mortgages, has been hurt by falling home prices and record foreclosures. The company has billions in medium-term debt coming due in about 90 days and needs to cash to continue operating.

Countrywide's stock plunged by over 5 percent yesterday after analysts at Merrill Lynch and UBS cut their profit estimates on worries over the company's ability to make new loans. The stock, which has fallen over 59 percent this year, closed at a four-year low of $17.21 yesterday.

Making matters worse, Alliance Capital Management, which is owned by giant French insurance company Axa SA, disclosed that it has sold about 31 million shares of Countrywide in the last month. Barclays Global Investors has also sold nearly 25 million shares.

"We think the stock will continue to drift down as investors lose hope of a near-term recovery," said Merrill analyst Kenneth Bruce. He estimates that the job cuts could save Countrywide roughly $1 billion a year, but that will only offset lower revenue.

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