Countrywide's White Knight

What about all the lawsuits that Countrywide was fending off? Does Bank of America inherit those as well?
The lawsuits are another of the major risks of this deal. They're entering into a company with so many predatory lending lawsuits against them and Bank of America is stepping into the liability chain. Defending those lawsuits or potential lawsuits, they'll have to absorb that cost. It's not like people will stop suing if Countrywide is acquired by Bank of America. Some [of those who planned to sue Countrywide] may well view it as a benefit: if Countrywide had failed and declared bankruptcy, those claims would be secondary. Now they can have litigation against a party that can make those payments.

What is the likelihood that this deal will close?
I think there's a fair amount of risk to whether it will close or not. Regulators still have time to opine and the deal is not scheduled to close until the third quarter. Many of these sales are never completed because a troubled company can deteriorate significantly [between the time a deal is announced and completed.] I'm sure Bank of America wrote a material adverse change clause which enables it to walk away from the deal if the financial condition of Countrywide deteriorates.

© 2008