Why Now?

Bank of America is looking for a scale in originating and servicing mortgages in the U.S. Countrywide had $408 billion in mortgage originations in 2007 and has a servicing portfolio of about $1.5 trillion with 9 million loans. The purchase also includes Countrywide''s Lender Placed insurance and other businesses.

Bank of America will benefit from Countrywide''s broader mortgage capabilities, including its extensive retail, wholesale and correspondent distribution networks. The Calabasas, California-based company operates more than 1,000 field offices and has a sales force of nearly 15,000. Countrywide also has a leading mortgage technology platform, a well known brand in home lending and management expertise in a number of key areas.

While few analysts dispute the benefits of the scale and Countrywide network of branches it is the timing and price tag of the deal that worries the most. The housing market correction is still ongoing and is likely to get worst in the next eighteen months.

Bank of America will take $1.2 billion restructuring charges.

Bank of America appears to be motivated in parts from its earlier $2 billion investment in the company. Since the purchase of convertible stock in the company in August 2007 Countrywide stock has lost more than 66% in value.

Acquisition Spree

Bank of America has done deals of nearly $100 billion in the last four years including the purchase of $48 billion of Fleet Boston Financial in 2004, purchase of MBNA in 2006 $34.2 billion, U.S. Trust from Charles Schwab for $3.3 billion, and LaSalle Bank in Chicago for $21 billion.


Bank of America was advised by Banc of America Securities and the law firms of Cleary, Gottlieb, Steen & Hamilton LLP and K&L Gates in the transaction. Countrywide was advised by Sandler O''Neill & Partners LP and Goldman Sachs Group Inc. and the law firm of Wachtell Lipton Rosen & Katz. Countrywide''s Board of Directors was advised by Sandler O''Neill & Partners LP. Both Goldman Sachs and Sandler O''Neill delivered fairness opinions to the Countrywide Board.


[R]6:00AM New York, 6:00PM - Hong Kong stock index closed down 2.4% for the week. China world trade rose 23.5% in 2007 and trade surplus in the year increased 48%.[/R]

Stocks in Hong Kong tumbled on worries that the subprime related losses will widen following a report Merrill Lynch might suffer more write-downs. The ongoing housing market correction has forced several large banks and brokers to seek additional capital from Middle East and China.

In Hong Kong trading the Hang Seng index fell 1.3% or 363.85 to 26,867.01, a decline of 2.4% for the week.

The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies fell 1.2 %, or 193.94 to 15,833.75, down 0.4% for the week.

Daily turnover on main board was HK$128.7 billion compared to HK$123.3 billion a day ago.

The New York Times reported yesterday that Merrill Lynch might report $15 billion more in write-downs, twice the previous estimate.

Xinhua News Agency reported yesterday that China’s trade surplus rose 48% to $262.2 billion, while the surplus for December narrowed to $22.7 billion from $26.2 billion in November.

Total trade in 2007 rose 23.5% to $2.17 trillion and trade surplus rose to $262.2 billion in 2007 from $177.47 billion in 2006. In 2007, exports rose 25.7% to $1.22 trillion, and imports climbed 20.8% to $955.8 billion, according to the administration.

The export growth was 1.5% points lower than in 2006 and import rose at 0.9%.