Re: Bank of America
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Like countrywide
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That was a loan.
J
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Incorrect...
Bank of America invested in Countrywide nonvoting convertible preferred stock yielding 7.25% annually. The preferred can be converted into common stock, subject to restrictions on trading for 18 months, at a conversion price of $18 a share. A full conversion would give Bank of America a 16% to 17% stake in Countrywide's common shares, Mr. Mozilo said.
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That was a loan 2B at 7.25%, 500M of which BAC got in the 5's from the discount window (which CFC was unable to go to).
It was not positive for CFC. Couple other notes from memory on the deal:
1. It puts BAC towards (but not at) the front of the line for assets in case CFC fails.
2. BAC has the option to match other buyout attempts (but cannot initiate one)
3. BAC is almost certainly hedged by shorting CFC.
4. $18 was about 3-4 beneath current trading value.
J
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