Bank of America (BofA) has agreed to buy Countrywide for around $4 billion; a transaction that will be made in stock so as to keep America’s biggest mortgage lender on its feet, the Wall Street Journal reports.
Following a massive amount of defaults on its loans, Countrywide has been struggling to survive, despite BofA’s previous efforts to keep the company afloat.
A $2 billion cash injection into Countrywide in August 2007, in return for 16% of the company, failed to save it from sub-prime woes.
But now BofA will buy the remaining stock for about $7.16 a share, sources have confirmed.
As a consequence of Countrywide’s first loss in 25 years in the third quarter, over 30% was wiped off its market value, to make a drop of 79% for the year.
Although Bank of America has lost around $1.3 billion on its original investment, the news of the deal has boosted Countrywide’s shares by 50%.