Tails you Lewis

5 May 2008 By Antony Currie Follow @AntonyMCurrie

Deteriorating housing markets are making the Bank of America boss s bid for the ailing mortgage lender look strained. If Lewis backs out, he ll probably lose $2bn immediately and earn the ire of Washington regulators. But sticking with it could cost BofA a bundle, too.

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Two sellside analysts have questioned Bank of America's decision to buy Countrywide Financial. Friedman, Billings and Ramsey analyst Paul Miller said that rising loan losses at the mortgage lender may enable BofA to drop its offer from about $7 a share to no more than $2 a share, or even to pull out of the deal altogether.

Richard Bove, of Ladenburg Thalman, wrote that BofA should not pay more than a token amount of $1 a share.

Last week, in an updated regulatory filing about the proposed takeover, BofA said it had not yet decided whether to guarantee Countrywide's debt. The lender's paper subsequently traded lower, and was downgraded to junk status by Standard & Poor's.

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