BOFA BOLSTERING COUNTRYWIDE WITH $2 BILLION INJECTION.

Byline: GREGORY J. WILCOX

Staff Writer

CALABASAS -- Bank of America agreed Wednesday to pour $2 billion into Countrywide Financial Corp. to help bail out the nation's largest mortgage lender amid the subprime-loan crisis.

The investment by the nation's largest retail banker, which has $1.5 trillion in assets, came a week after Countrywide tapped an $11.5 billion line of credit to continue funding its operations. It could lead to a takeover by Bank of America at some point.

Countrywide said Charlotte, N.C.-based Bank of America will get convertible preferred stock that returns 7.25 percent annually. Bank of America's holdings can be converted into common stock at $18 per share, with restrictions on trading for 18 months after the conversion.

The funding was completed Wednesday and announced after the markets closed. Countrywide's shares, which have lost half their value this year, soared 20.53 percent, or $4.48, to $26.30. They sank to a 52-week low of $15 on Aug. 16. But they are still under the 52-week high of $45.26 reached Jan. 26.

The investment came two days after the company said it was cutting 500 jobs from Full Spectrum Lending, its subprime unit, and reassured depositors in Countrywide Bank FSB that the institution was sound despite the credit crisis.

Countrywide Chairman and Chief Executive Officer Angelo Mozilo, in a statement, called Bank of America one of the most respected companies in the word.

"Bank of America's investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success," he said. "This transaction benefits all of Countrywide's constituents, including investors, shareholders, mortgage customers, deposit holders, business partners and employees."

Spokesman Rick Simon said Countrywide would not comment beyond the press release.

Confidence shown

Bank of America Chairman and Chief Executive Officer Kenneth D. Lewis said in a statement his company believes that the current market turmoil has underestimated the value in Countrywide's operations and assets.

"This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country. We hope this investment will be a step toward a return to a more normal liquidity in the mortgage markets," he said.

He also noted the strength of Countrywide's home-loan origination business and the fact it services the mortgage in one of seven American households.

After Countrywide accessed the $11.5 billion credit line, Paul J. Miller, an analyst at Friedman, Billings, Ramsey & Co., said in a research report that Countrywide's survival depended on how long the mortgage crisis lasts and that bankruptcy was a possibility.

"We do believe there is a scenario in which the current liquidity crises lasts for longer than three months and CFC is forced into bankruptcy," he wrote at the time. "It will be ugly, but it can happen!"

Fortunes changing

The company's fortunes may have changed in a week's time and now there is the possibility that Bank of America could end up owning Countrywide.

"Bank of America and Countrywide: Brilliant! You can take your BAC (Bank of America earnings) estimates and raise them big. And you can take CFC's bankruptcy off the table once and for all," said Jim Cramer, a commentator at The Street.com in a posting on MarketWatch.com.

He noted that when the Federal Reserve Board cut a key interest rate this week, it gave Countrywide some breathing room.

"That meant that someone, someone with capital was going to buy CFC and own the origination market," the posting said.

Rumors that Bank of America was courting Countrywide surfaced last January in what at that time would have been a $30 billion deal.

Mozilo founded Countrywide in Glendale in 1969 and since then has grown it into a diversified financial company. Its business lines include banking credit reports and insurance.

Bank of America is one of the world's largest financial institutions with 57 million consumers and 5,700 retail banking offices in the U.S.

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