Merrill Lynch & Co. analyst Kenneth Bruce has downgraded America’s largest mortgage lender from a “buy” to a “sell”, claiming that the company may have to file for bankruptcy. From Reuters:
“If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly then the model can break, leading to an effective insolvency,” Bruce wrote. “If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt.”
Nearer term, he said “the acceleration of margin calls and forced asset sales in the capital markets could lead to more problems for Countrywide to finance its mortgage operations.”
According to Reuters, Countrywide had been assuring investors that it would flourish after the current crunch is over.
Now that one of Wall Street’s biggest investment banks has thrown in the towel — on the biggest mortgage player– it’s safe to say that the mortgage bubble is officially popped.
Countrywide cut by Merrill; bankruptcy raised [Reuters]
Merrill’s reversal on Countrywide is turning point [MarketWatch]