BofA Prompts Countrywide Downgrade

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Countrywide Financial Corp.’s credit rating was cut to “junk” by Standard & Poor’s Corp. Friday after Bank of America Corp. said it may not pay all of the Countrywide’s debt if it acquires the lender.


BofA said earlier Friday that it may not guarantee $38.1 billion of Countrywide’s debt after taking over the mortgage lender.


The credit rating agency said “the new level of uncertainty as to the ultimate legal status of Countrywide’s creditors” prompted the downgrade.


The downgrade comes two days after S & P; said it was considering raising Countrywide’s ratings. That created optimism among investors that debt holdings would become more secure after Bank of America completes its takeover. BofA has an AA credit rating.


The purchase of Countrywide is scheduled to be completed in the third quarter but the deal is in some question as investors have speculated that BofA may seek a lower price or cancel the deal due to current market conditions.

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