Nation's Largest Lender Borrows $11.5 Billion To Stave Off Bankruptcy After Mortgage Meltdown

NEW YORK (Reuters) - Countrywide Financial Corp. , the largest U.S. mortgage lender, said on Thursday it is drawing down an entire $11.5 billion credit facility to bolster liquidity as a shortage of credit devastates much of the mortgage industry.Shares of Countrywide fell $1.54, or 7.2 percent, to $19.75 in premarket trading. Through Wednesday, Countrywide shares had fallen by 50 percent this year.The drawdown was announced a day after a Merrill Lynch & Co. analyst said Countrywide could eventually face bankruptcy, and many investors said the Calabasas, California-based lender was having greater difficulty selling short-term debt.It also shows how liquidity strains have spread beyond subprime lenders to larger companies that made predominantly higher-quality loans."The big question is, can Countrywide survive," wrote Paul Miller, a Friedman, Billings, Ramsey & Co. analyst.He said if liquidity problems last more than a month, "Countrywide might be forced to sell assets at a deep discount, putting tremendous pressure on its book value and stock price."There is a scenario in which the current liquidity crises last for longer than three months and Countrywide is forced into bankruptcy; it will be ugly, but it can happen!" he said.Countrywide did not immediately return calls and an e-mail seeking comment.Countrywide's 5.8 percent notes maturing in 2012 fell 4.3 cents on the dollar to 85.7 cents, yielding 9.60 percent, according to Trace, the Financial Industry Regulatory Authority's bond pricing service.CONSTRAINEDCountrywide said the unsecured facility was provided by 40 large banks. More than 70 percent of the facility has a term of longer than four years, while the rest has a term of at least 364 days, it said."Along with reduced liquidity in the secondary market, funding liquidity for the mortgage industry has also become constrained," Chief Operating Officer David Sambol said. "Countrywide has taken decisive steps which we believe will address the challenges arising in this environment."
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