Bank of America knows when it's time to buy.
The Charlotte, N.C.-based bank is making a $2 billion equity investment in the beleaguered Countrywide Financial (nyse: CFC - news - people ), the companies said Wednesday evening.
Bank of America (nyse: BAC - news - people ) will purchase $2 billion worth of preferred Countrywide stock yielding 7.3%, and that can be converted into common stock at $18 per share, giving the mortgage lender a much-needed cash infusion amid a crippling credit crunch.
Countrywide shares soared 20.01%, or $4.37, to $26.19 after hours Wednesday on the news. Bank of America shares rose 1.9%, or 98 cents, to $52.63.
Bank of America is buying low, and Peter Slatin, founder of the Slatin Real Estate Report, believes it’s a good bet on Countrywide, which he said has been an aggressive lender, not a stupid one.
“It’s not just propping up a bad company, but showing faith in a reasonable company,” Slatin said, “and I think the future of the American housing market, if not the immediate future.”
Countrywide's now trading just above 12 bucks per share.
Bank of America knows when it's time to buy!