Countrywide shares drop on report
Shares of mortgage giant Countrywide Financial Corp. fell for a sixth straight session Tuesday on a report that the Calabasas company again was running short on cash.
Countrywide stock traded as low as $16.18 and ended at $16.88, down 33 cents and the lowest closing price in four years.
In an online report, the New York Post said Countrywide was working with investment bank Goldman Sachs & Co. to arrange a multibillion-dollar cash infusion that could include JPMorgan Chase & Co., Citigroup Inc. or several hedge funds.
Goldman Sachs declined to comment on the Post report. Countrywide said that its policy was “not to comment on market rumors” and that it already had taken “decisive steps” to address its cash needs by striking a deal in August with Bank of America Corp. and by drawing down an $11.5-billion line of credit provided by a group of banks.
Last month, as rumors swirled that Countrywide could face bankruptcy, BofA invested $2 billion in the company via the purchase of preferred stock. The deal gave BofA the option to convert the investment into 16% of Countrywide’s common stock at $18 a share.
The infusion helped the stock rebound to as high as $22.02 on Aug. 23, but it has mostly been sliding since then on concerns that the company’s woes were deepening. On Monday, Merrill Lynch & Co. and UBS Securities slashed their estimates of Countrywide’s future earnings.
Unlike traditional bank lenders, Countrywide had relied to a great extent on Wall Street for short-term funding by selling commercial paper, or short-term IOUs -- the market for which has evaporated along with investors’ hunger for many of the company’s mortgages.
Countrywide said Friday that it planned to eliminate as many as 12,000 jobs, nearly 20% of its staff, as it refocused on making loans that could be funded through its own bank and sold to government-chartered mortgage investment companies.
The mortgage meltdown began last year as defaults surged on high-risk sub-prime loans.
Separately Tuesday, H&R; Block Inc. said it would lay off 545 workers at its Irvine-based sub-prime unit, Option One Mortgage Corp., on top of 615 jobs it cut in May. Block is trying to complete the sale of Option One’s remains to a hedge fund.
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