Bank of America to invest $2B in Countrywide

Bank of America to invest $2B in Countrywide
Second largest U.S. bank plans to invest in preferred stock of the mortgage lender
August 22 2007: 6:44 PM EDT

NEW YORK (Reuters) -- Bank of America Corp. plans to invest $2 billion in Countrywide Financial Corp., the mortgage lender that recently faced a liquidity crunch, The Wall Street Journal reported Wednesday.

The second-largest bank will buy preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, the newspaper said, citing unnamed people familiar with the situation.

Bank of America spokesman Scott Silvestri and Countrywide spokesman Rick Simon did not immediately return calls seeking comment.

Countrywide's market value was about $12.6 billion as of Wednesday's close. Its shares rose $3.73, or 17.1 percent, to $25.55 in after-hours electronic trading. Bank of America shares rose 69 cents to $52.34 after-hours.

Calabasas, California-based Countrywide, the largest U.S. mortgage lender, surprised investors last week when it tapped an entire $11.5 billion credit line because it was having difficulty selling short-term debt.

In January, before the mortgage and credit crisis surfaced, Charlotte, North Carolina-based Bank of America was the subject of speculation it might buy or enter a joint venture with Countrywide.

Countrywide foreclosures at multi-year high
Referring to the mortgage sector, Bank of America Chief Executive Kenneth Lewis said at the time, "we like the product but don't like the business," and that "we're not particularly interested in the wholesale and correspondent business."

Bank of America probably could not acquire Countrywide outright for a while. The bank's pending acquisition of LaSalle Bank Corp from ABN AMRO Holding NV would push it up against a federal cap on deposits and buying the operator of Countrywide Bank would probably push it over.

Countrywide (Charts, Fortune 500) shares were up 18.7 percent in after-hours trading in response to the report. Bank of America (Charts, Fortune 500) shares gained 1.6 percent on the New York Stock Exchange.