Bank of America
(NYSE:BAC) shares rose marginally after the company revealed that it
had the troubled Countrywide with a $2 billion purchase of convertible
non-voting preferred stock. The move helped the largest mortgage
company in the United States to clean up its balance sheet while
presenting the bank with a great opportunity to profit.
Shares
in Countrywide jumped over 20 percent afterhours widening the 17
percent discount at which the preferred stock was issued. The move also
underscores the severity of the subprime problem as such a large
discount was required for investment. Skies are not yet clear either
for Bank of America, which now holds a substantial stake in a company
that has had its value roughly cut in half so far this year.
In
the end, the move will help the mortgage banker stay alive for another
day while presenting a great opportunity for BAC. There is also some
speculation that BAC may actually be interested in acquiring the
mortgage banker outright; however, that situation may face some heavy
regulatory hurdles given BAC's pending $21 billion purchase of ABN
Amro. Regardless, BAC is definitely a
stock to watch!
Related CompaniesWachovia Corporation (WB)West Coast Bank Corp. (WCBO)Regions Financial Corp. (RF)