Battered mortgage lender Countrywide Financial Corp. said it secured $12 billion of additional debt financing yesterday as it continues to struggle funding new home loans amid the global credit crunch.
News of the additional funding, which Countrywide said came from new and existing credit lines, boosted the stock 14 percent in yesterday’s trading. Shares in the nation’s largest mortgage company closed up $2.31 to $18.93.
A company spokesman declined to reveal details about who provided the new debt and what the terms and interest rates are.
The ability to find new sources of capital “should substantially address funding concerns at the company,” said Credit Suisse analyst Moshe Orenbuch.
Still, sources with knowledge of Countrywide said the new funding buys the company more time for the commercial paper market to rebound, but does not take care of deeper liquidity problems.
While a Countrywide bankruptcy is a remote possibility at this point, many analysts believe the company could still need more capital down the road in order to continue funding mortgages. The company continues to work with Goldman Sachs to secure additional debt and equity financing, sources said.
Countrywide last month borrowed $11.5 billion from bank credit lines to shore up its balance sheet. Bank of America then made a $2 billion preferred stock investment in the Calabasas, Calif.-based company to provide it with further funding.
“Now that Countrywide is having success obtaining credit, the onus is even greater on them to clean up their act,” said New York Sen. Chuck Schumer.
“Instead of being part of the problem, they should be part of the solution by refinancing the bad mortgages they made so that as many families as possible keep their homes.”
North Carolina Treasurer Richard Moore, who runs the state’s $75 billion pension fund, asked Countrywide yesterday if it plans to recoup bonuses paid to executives that were based on “bogus short-term profits.”
In addition to the new debt, Countrywide said lending last month fell 17 percent to $34 billion and applications dropped 12 percent from the same period last year. About $52 billion of applications were being processed as of Aug. 31, a 19 percent drop. The downturn in mortgages was roughly in line with what analysts had expected.
“The company expects that it will be a long-term beneficiary of the current conditions and corrections in the mortgage industry,” Countrywide President David Sambol said in the statement.
On Tuesday, employees sued Countrywide and Chief Executive Angelo Mozilo, saying the company’s failure to warn of its deteriorating financial health cost them millions of dollars in retirement savings.