After Countrywide's ugly $890 million first quarter loss, speculation has been rampant that Bank of America will try to pull a Houdini and wiggle out of its agreement to buy the mortgage lender. Speculation took to new heights this week when Friedman, Billings, Ramsey analyst Paul Miller strongly cautioned BofA against the deal, and suggested that the bank may try to renegotiate the price down to the $0 to $2 per share level.
The question at hand here really isn't whether Countrywide is going to suck for the foreseeable future -- despite what CEO Angelo Mozilo said late last year, that's pretty much a given. The issue is whether Countrywide will suck more than BofA's proposed buyout price suggests. Since BofA's original buyout offer was at about $4 billion, it's possible that it's already expecting at least another $9 billion hit to Countrywide's book value. That would assume a buyout at one time projected book value, which would be relatively cheap given Countrywide's trading history.
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