Let’s call this shareholders revenge. SRM Global Fund, the hedge fund run by former UBS trader Jon Wood, has taken a 5.19 per cent stake in the Calabasas mortgage lender and is seeking to block the pending sale to Bank of America. Just not enough value for shareholders, according to SRM’s filing. “We strongly believe that the terms of the proposed merger with Bank of America are contrary to the interests of the company’s shareholders,” SRM said. Well, it sort of depends on how you look at it. Some believe Bank of America has saved Countrywide from bankruptcy – and yet shareholders would only receive 0.1822 BofA shares for every share they hold. That's less than $8 a share; Countrywide’s book value as of December 31 2007 was over $20 a share (it's trading this morning at $6.50). From the FT:
SRM said it would now take steps to “preserve the value of its investment and protect its rights and will vote against the proposed merger”. It added: ”We think that the board of the company and its advisers should fully explain to shareholders the reasons why they have agreed to recommend the transaction to shareholders at less than half of the company’s book value, and explain what circumstances have changed since the company’s [third-quarter 2007] earnings.”
Separately, Florida Attorney General Bill McCollum wants to know more about Countrywide's business practices - specifically, how Countrywide handles borrower payments as well as materials related to sales practices and standards for making loans. He's also investigating whether Countrywide has charged excessive fees to borrowers in the foreclosure process. From the WSJ:
Florida joins several other states, including California and Illinois, that have begun investigating Countrywide to determine whether the company's lending practices contributed to or were responsible for the rising wave of problem mortgages in the state. According to the Mortgage Bankers Association, 6.47% of all mortgage loans in Florida were past due in the third quarter, one of the highest rates of any state in the country.