The Countrywide Letter

Even though Angelo is not talking to me (see earlier post) this IS what he is saying to his employees. I think the B of A investment underscores the strength of the company and the degree to which the market is currently undervaluing their performance and potential.

Here’s the letter:

Subject:

Memorandum from Angelo Mozilo

This memo is being distributed to all CFC Employees

Dear Colleague:

Since co-founding Countrywide nearly 40 years ago, my absolute priority has been to safeguard the safety and stability of our Company. Consistent with this, last week we announced that we have supplemented our funding liquidity position by drawing on an $11.5 billion credit facility. In addition, the Company has accelerated its plans to migrate its mortgage production operations into Countrywide Bank, FSB. These important and decisive steps have been extremely effective in addressing some of the significant short-term challenges that we were facing due to the liquidity crunch occurring in global credit markets. Today, I am extremely pleased to inform you that Countrywide has received a $2 billion strategic equity investment from Bank of America. This is another important action we have taken to help further strengthen Countrywide’s balance sheet, enabling us to position Countrywide for future growth and success.

Bank of America’s investment in Countrywide represents a resounding vote of confidence in the powerful franchise that we have built at Countrywide, and benefits all of Countrywide’s constituents, including investors, mortgage customers, deposit holders, business partners and employees, who are our most valued asset. It is important for you to know that this is not an acquisition of Countrywide by Bank of America, and in fact the investment equates to a 15 per cent equity stake in Countrywide.

Here is what Kenneth Lewis, Bank of America ,s chairman and CEO said about this investment:
We believe that in the current turmoil the stock market has been underestimating the value in Countrywide’s operations and assets,” said Kenneth D. Lewis, Bank of America chairman and chief executive officer. This investment reflects our confidence in their business and recognizes the importance of the company in providing home financing across the country. We hope this investment will be a step toward a return to a more normal liquidity in the mortgage markets. Countrywide has a strong mortgage origination business and it services the mortgages of one in seven American households.

This new relationship between our two companies is an extremely positive step for Countrywide, and it will go a long way toward taking Countrywide out of harm’s way in this very challenging market environment. I was recently quoted in the media as saying that aside from my loving family, Countrywide is the most important thing in my life. You have my commitment that I will continue to dedicate my full energy to ensuring that Countrywide remains a strong company, and that we realize our full potential as an organization.

We have many challenges still ahead of us, particularly given the weakness in the housing and mortgage markets that we anticipate will extend well into next year. You should know that our entire senior management team, led by our President & COO Dave Sambol, and many of your dedicated colleagues have been working tirelessly—-often around the clock, 7 days a week—to make these actions a reality. I extend my deepest gratitude to each of them for their unyielding commitment, their tenacity, and the tremendous sacrifices and contributions they have made during this time, which has undoubtedly been the most challenging period in Countrywide ,s history.

Through this important investment from Bank of America, today Countrywide’s future is much brighter. Thank you for the work you do every day for our valued customers, business partners and shareholders. And most importantly, thank you for your extraordinary dedication to each other and this great Company.

Yours truly,

Angelo

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With Bank of America’s investment, Wall Street is likely to put aside fears that the company could fail, analysts said.

“Countrywide is no longer on the endangered company list,” Punk Ziegel & Co. analyst Richard X. Bove said in a note to investors.

“Clearly Mozilo does not want to sell yet,” Bove wrote in an e-mail to The Los Angeles Times. “But when he does, it looks like [BofA] will win the prize — and it is a prize despite what has been said recently.”

The preferred shares that BofA acquired are nonvoting. If BofA converts them to common shares, it can’t sell them for 18 months.

BofA’s shares rose to $52.60 after hours. They had closed at $51.65, up 35 cents, in regular trading.

The deal could mean big losses today for traders who have “shorted” Countrywide shares — betting that their price would continue to slide. The number of shorted Countrywide shares surged to a record 83.6 million on Aug. 10 from 51.4 million a month earlier, according to New York Stock Exchange data. The short sellers of Countrywide stock may rush today to close out their wrong-way bets, adding fuel to any rally in the shares.