BofA Keeps Countrywide Bankruptcy as Option

[marmar]

(Bloomberg) Bank of America Corp. (BAC), the lender burdened by its Countrywide Financial Corp. takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent, said four people with knowledge of the firm’s strategy.

The option of seeking court protection exists because the Charlotte, North Carolina-based bank maintained a separate legal identity for the subprime lender after the 2008 acquisition, said the people, who declined to be identified because the plans are private. A filing isn’t imminent and executives recognize the danger that it could backfire by casting doubt on the financial strength of the largest U.S. bank, the people said.

The threat of a Countrywide bankruptcy is a “nuclear” option that Chief Executive Officer Brian T. Moynihan could use as leverage against plaintiffs seeking refunds on bad mortgages, said analyst Mike Mayo of Credit Agricole Securities USA. Moynihan has booked at least $30 billion of costs for faulty home loans, most sold by Countrywide during the housing boom, and analysts estimate the total could double in coming years.

“If the losses become so great, how can Bank of America at least not discuss internally the relative tradeoff of a Countrywide bankruptcy?” Mayo, who has an “underperform” rating on the bank, said in an interview. “And if you pull out the bazooka, you’d better be prepared to use it.” ...........(more)

The complete piece is at: http://www.bloomberg.com/news/2011-09-16/bofa-said-to-keep-bankruptcy-as-option-for-countrywide-unit.html

[RUMMYisFROSTED]

1. Hugely ironic. nt

[exboyfil]

2. I think this could be a big time piercing of the corporate veil

if they try to only send Countrywide into bankruptcy. I know if I am a bondholder that I am going after the parent. Countrywide after the purchase was not operated as an independent company.

[galileoreloaded]

4. I guarantee there is a UCC-1 that secures first position.....good luck. N/T

[Broderick]

3. If I claim bankruptcy

can I keep my house free and clear?

They kept my interest.

[FarCenter]

5. If you set up a LLC and use it to purchase your house, then you can.

A common strategy is to set up a Limited Liability Corporation to conceal the identity of a bidder for real estate. Celebrity buyers, in particular, do this.

However, the LLC also keeps the business of house ownership separate from the individual's personal business.

The LLC or the individual could go bankrupt separately.

[Broderick]

6. Can a single listed principle LLC do this?

Missing the term for the executive or whatever, but many LLC are single owner on the charter... Sorry, brain fart.