Countrywide Denies Speculation of Bankruptcy
An article published by CNN takes a look at Countrywide’s claims that it has ample capital and liquidity to stay in business. According to the article:
- “Countrywide Bank, the Company’s primary operating entity, has sufficient liquidity available to meet its projected operating and growth needs and has accumulated significant contingent liquidity in response to evolving market conditions,” the firm said in a statement.
- Earlier Tuesday a Countrywide representative told The Wall Street Journal that speculation the company may file for bankruptcy is “absolutely false.”
- Countrywide said it has $35.4 billion in reliable liquidity available at Oct. 31, up from $33.6 billion available in September.
- A securities analyst suggested that problems at Freddie Mac (FRE) and Fannie Mae (FNM) could cut off liquidity for Countrywide and downgraded the shares.
- “Countrywide’s survival strategy has depended on access to the secondary markets through GSE purchase and re-securitization. That strategy is less viable in an atmosphere where the GSEs themselves are capital constrained and may need to shrink,” Fox-Pitt, Kelton analyst Howard Shapiro wrote on Tuesday.
If the stability of the company is dependent on a market that may prove as volatile as the current mortgage industry, that doesn’t offer much reason for investors to be confident. Countrywide may very well be able to keep its head above water so long as the second mortgage markets don’t crash. But it’s still a risk that many investors may not be willing to take.
November 27, 2007 | Filed Under Second Mortgage
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