www.bloomberg.com/apps/news?pid=20601087&sid=alpGocvOGiDM
Effective insolvency'' would result if creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note today. Shareholders shouldn't understate the importance of liquidity,'' Bruce wrote. Countrywide's shares have lost almost half their value this year on concern a credit crunch in the mortgage industry will erode profit. and other companies tied to the mortgage industry dropped today on speculation earnings will be hurt by the crisis. Bankers have curtailed lending to mortgage providers and demanded more collateral, forcing more than 70 companies to seek buyers or shut since the start of last year. The company previously borrowed at 15 basis points, or 015 percentage point, over the London interbank offered rate, the cable-television network reported. Libor, as the rate is known, currently is about 557 percent for 30-day borrowings. Countrywide's overnight corporate commercial paper was quoted today at 6 percent and 65 percent for 30 days, according to Denise Latchford, director of money funds for American Century Investments, in Mountain View, California. cut its ratings on shares of the real estate investment trust. The perceived risk of owning Countrywide's bonds increased, according to credit-default swap prices. Countrywide five-year credit swaps climbed 225 basis points to 600 basis points, according to broker Phoenix Partners Group in New York. A rising price indicates more skepticism about a company's solvency. Last week, Countrywide said it had access to about $187 billion in credit. Chief Executive Officer Angelo Mozilo assured investors that the company has enough cash to cope with the market turmoil, and said it may even benefit as competitors are forced out of business. Expensive' Steps We continue to think the company can survive a period of secondary market instability,'' Bruce said in his note. Carrie Gray, a spokeswoman for Merrill Lynch, declined to make Bruce available for comment. Any talk of bankruptcy is grossly exaggerated,'' said Edwin Walczak, who manages $600 million at Vontobel Asset Management in New York and owns 182 million Countrywide shares. The company later said it found buyers for C$600 million ($557 million) of the securities. We hesitate to use the word contagion, but this market is feeling awfully similar to the fall of 1998,'' he said, referring to the market crisis that resulted from Russia's debt default and the collapse of hedge fund Long-Term Capital Management LP.
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