Countrywide Financial Corp., which last week said it had drawn down an $11.5 billion line of credit with 40 of the world’s largest banks, announced Wednesday that it had obtained an additional $2 billion capital infusion from Bank of America — but it came at a price.

In return for its investment, Bank of America was granted a nonvoting convertible preferred security yielding 7.25 percent annually, which it can convert into common stock in the company at $18 per share.

Countrywide’s stock, which has traded at $15 to $45 in the past year, closed at $21.82 Wednesday before the announcement of Bank of America’s investment was released.

Countrywide stock surged 10 percent Tuesday after a Wall Street Journal story discussed the possibility that Berkshire Hathaway Inc. would seek to acquire the Calabasas, Calif.-based lender. Bank of America has also been mentioned as a potential Countrywide suitor, and the lender’s stock was up 20 percent in after-hours trading Wednesday.

Countrywide stock hit a year low of $15 a week ago after an analyst warned the company could face bankruptcy if it was unable to obtain short-term funding for its loans and was forced to sell its assets at a discount.

The stock rebounded after the Federal Reserve slashed the discount rate — the rate banks pay for direct loans — from 6.25 percent to 5.75 percent, and made the loans repayable over 30 days, instead of overnight.

“We believe that in the current turmoil the stock market has been underestimating the value in Countrywide’s operations and assets,” Kenneth Lewis, Bank of America chairman and chief executive officer, said in a statement. “This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country.”

Lewis said he hoped Bank of America’s investment would be “a step toward a return to a more normal liquidity in the mortgage markets.”

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription