Countrywide Rating Cut to `Junk' By Standard & Poor's

May 2 (Bloomberg) -- Countrywide Financial Corp.'s credit rating was unexpectedly cut to junk by Standard & Poor's Corp., which cited doubt about whether Bank of America Corp. will back the home lender's debt after they combine.

The revision reflects ``the new level of uncertainty as to the ultimate legal status of Countrywide's creditors'' after the lender's sale to Bank of America, Standard & Poor's said in a statement today. Prices on some Countrywide debt tumbled and instruments that protect investors from default posted their biggest jump in almost four months.

The cut, just two days after S&P said it might raise Countrywide's ratings, squelched expectations among bond owners that their holdings would become more secure after Bank of America completes its takeover. Countrywide was short on cash when the deal was announced in January, so bondholders may have to go to court if Bank of America refuses to stand behind all of the lender's $97.2 billion in debt.

Bloomberg