Fitch Ratings has placed all ratings of Countrywide Financial
Corporation (CFC) on Rating Watch Evolving, removing them from Rating
Watch Positive. The Rating Watch Evolving reflects further disclosure
surrounding Bank of America's (BAC) treatment of CFC debt following the
acquisition. While Fitch continues to believe that BAC's acquisition of
CFC will likely close, today's rating action considers uncertainty over
the transaction's final structure. A complete list of ratings follows at
the end of this release.
As disclosed in BAC's amended S-4 filed on May 1, 2008, BAC left open
the possibility that any remaining CFC debt could remain obligations of
CFC and not BAC. Further, BAC made no assurances that such debt would be
redeemed, assumed or guaranteed. Any structure that does not result in
full BAC support of CFC could result in some or all CFC ratings being
notched below those of BAC, with the potential for significant notching,
including CFC debt being downgraded below its current level. Conversely,
depending upon the ultimate structure, some or all of CFC's ratings
could be equalized with BAC ratings. (BAC rated 'AA/F1+', Rating Watch
Negative by Fitch.)
CFC's ratings had been on Rating Watch Positive pending the acquisition
of CFC by BAC, announced in January 2008. Since that time, BAC has
repeatedly indicated its expectation that the transaction will be
completed and Fitch continues to believe that the probability that the
transaction is completed remains extremely high. However, BAC has been
unusually silent regarding the ultimate structure of the transaction
CFC's results have deteriorated further as the residential mortgage
sector continues to weaken. First quarter results produced a net loss of
$983 million, more than double the loss recorded in the final quarter of
2007. CFC recorded sharply higher loan loss provisions, increased
provisions for representations and warranty claims, increased provisions
for captive mortgage insurance claims, and a high, albeit reduced, level
of impairment of retained interests. Given CFC's operating difficulties
and the stressed environment, CFC's ratings would be likely be
downgraded absent the capital and liquidity support already provided by
BAC, and more likely still if the merger is not consummated.
The following ratings have been removed from Rating Watch Positive to
Rating Watch Evolving
Countrywide Financial Corp.
--Long-term Issuer Default Rating (IDR) 'BBB-';
--Short-term IDR 'F3';
--Individual 'C/D';
--Senior debt 'BBB-';
--Subordinated 'BB+;
--Commercial paper 'F3';
--Support '5';
--Support floor 'NF'.
Countrywide Bank FSB
--Long-term IDR 'BBB-';
--Short-term IDR 'F3';
--Individual 'C/D';
--Senior debt 'BBB-';
--Long-term deposits 'BBB-';
--Short-term deposits 'F3';
--Short-term debt 'F3';
--Support '5';
--Support floor 'NF'.
Countrywide Home Loans, Inc.
--Long-term IDR 'BBB-';
--Short-term IDR 'F3';
--Senior debt 'BBB-';
--Commercial paper 'F3'.
Countrywide Capital I, III, IV, V
--Trust preferred 'BB'.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
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