MANHATTAN – Bank of America this morning said it will pay $4 billion in stock to buy Countrywide Financial, the financially troubled and much-sued lender that has become the poster child for the subprime lending fiasco.
BofA said both corporate boards have approved the deal, which will issue Countrywide shareholders 0.1822 shares of BofA stock for each Countrywide share, if Countrywide shareholders approve.
Countrywide share price fell by 83 percent last year, from a high of $45.26 a year ago, as its lending practices came to light. Its shares sold at $7.16 before trading opened today.
Countrywide reported on Wednesday that 7.2 percent of its loans were delinquent, up from 4.5 percent a year ago, while its foreclosure rate doubled in the same time, to 1.44 percent.
Bank of America paid $2 billion – $18 a share – for Countrywide stock in August 2007, acquiring roughly one-sixth of the company.
In addition to acquiring Countrywide’s loans, BofA also will acquire its legal problems. Angelo Mozilo is expected to remain as CEO of Countrywide until the deal is complete, despite the scorching criticism he has taken for his nearly $700 million in salary and options since he became CEO in 1999.