Countrywide – even with the servicing business – had negative value.
Incorrect, use DCF and you’ll see it. Also remember that BofA paid the like of $0.02 for $1.00 worth of SFR mortgages.. so guess how low the foreclosure price of the property could go before BofA really loses money? A discount of 50% on the price of the property will not bother BofA that much, since their price that they paid was an 80% discount.[/quote]
Use DCF? Use DCF… yes, that’s a good idea but for the fact that… we don’t know yet what the CF (cash flow, that is) is going to be (although I’m sure BofA likes to pretend that they know). “BofA paid the like of $0.02 for $1.00 worth of SFR mortgages?” Huh? BofA paid $4.1 billion for Countrywide. Countrywide was levered 13-1 at the time of the acquisition. That means if the assets on Countrywide’s balance sheet (mostly loans) turned out to be worth 8% less than their book value at the time of the acquisition, you start into negative territory. Now, the servicing business is worth something. What, I don’t know… but not nearly as much as it used to be because SFR servicing is a money losing business right now. My point is that if you believe that BofA bought a bunch of loans at 2 (or 20) cents on the dollar, you don’t know a single thing about bank balance sheets and acquisitions. And less about the Countrywide acquisition.
[quote=ucodegen]
As far as MAC clauses are concerned, if you do proper due diligence in the first place – which wasn’t done in either case – then the MAC clause is irrelevant.
This is also incorrect. You are not necessarily allowed to see and audit the books of a company before you start acquisition. It is considered proprietary and inside info. There is a phase during acquisition that an independent auditor goes through the books after declaring the intent to acquire… a relative of mine used to do that type of auditing until about 4 years ago.[/quote]
What? The MAC clause is invoked – if it’s invoked at all – AFTER the acquisition process has started, the transaction has been announced, and BEFORE the proposed closing date (because something “material” shows up after due diligence has been completed and the transaction has been announced). Independent auditor? Huh? Look, I have no idea what you’re talking about. I’ve performed due diligence in over 20 proposed bank acquisitions. (Granted, MUCH MUCH smaller than Countrywide – to be clear.) It’s part of what I do for a living. You don’t hire an “independent auditor” to do the loan due diligence, you hire a “loan review firm” of your own choosing that answers to you, the acquirer.
I gotta tell ya… it seems pretty clear to me that you don’t have any idea whatsoever as to what you’re talking about. I’m sorry, but there’s no other way to put it.
