NEW YORK (Reuters) - While Bank of America (BAC.N: Quote, Profile, Research) still has not explicitly said it would guarantee Countrywide's debt after it completed the acquisition of the largest U.S. mortgage lender, bondholders are seen likely to be made whole.
The second largest U.S. bank last week completed its purchase of Countrywide debt for about $2.5 billion, but bondholders are still waiting for the Charlotte, North-Carolina based bank to say how it would treat the mortgage lender's debt, estimated at $40 billion.
Bank of America provided no guarantees in its latest regulatory filing on Tuesday but the new organizational structure detailed there indicates bondholders will be repaid, CreditSights analyst David Hendler said in a report.
"Countrywide's bank credit facilities have been repaid and its outstanding debt has been assumed by an indirect subsidiary, created and wholly owned by BofA," Hendler wrote.
"Our view continues to be that BofA will ultimately honor the outstanding indebtedness from (old) Countrywide, based on our discussion with the company following this filing, as well as our prior analysis."
Countrywide's bonds have rallied and its credit default swaps have tightened as investors felt more secure. Spreads on Countrywide's 4 percent notes due in 2011 narrowed to 2.96 percentage points over Treasuries on Wednesday, from as wide as 7.49 percentage points in May.
Both bond and credit default spreads gapped out when Bank of America in April said it was examining options for Countrywide debt and that there was "no assurance" it would redeem, assume or guarantee the debt.
But according to the latest filing, a fully-owned Bank of America subsidiary assumed Countrywide's indebtedness, including subordinated notes, junior subordinated notes, euro medium term notes, preferred stocks and convertible securities.
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