Countrywide Financial Corp. denied Tuesday that it was considering filing for bankruptcy protection, but its stock price collapsed on widespread rumors, falling to an 11-year low.
The Calabasas-based company, which cut more than 11,000 jobs last year, was pummeled by the bankruptcy speculation and Wall Street gossip that its debt would be downgraded by one of the major bond-rating firms.
Countrywide's shares fell $2.17, or 28.4%, to $5.47 -- down 87% from a year ago. The stock market value has sunk to $3.2 billion from $27 billion.
The dominant mortgage lender during the housing boom, Countrywide has said that it has enough money to stay in business and predicted in October that it would turn a profit this year.
But it has been struggling under the weight of soaring defaults on sub-prime loans and an array of legal woes.
Its lending practices are under investigation by California Atty. Gen. Jerry Brown and the Illinois attorney general's office, and the Securities and Exchange Commission is looking into potentially improper trading by insiders, most notably Chief Executive Angelo Mozilo, who sold more than $140 million of stock before the price began tanking. In addition, the U.S. trustee's office is probing allegations that the company levied inappropriate charges on mortgage holders going through bankruptcy.
The New York Times reported Tuesday that court records showed that Countrywide fabricated documents related to the bankruptcy case of a homeowner in Pennsylvania who was targeted for foreclosure, apparently bolstering concerns that the lender acted improperly.
The New York Stock Exchange briefly halted trading in the stock early Tuesday after it declined to $5.76. The company issued a statement and the price rebounded briefly before tumbling again.
"There is no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company," the Countrywide statement said.
Analysts said they were troubled by a lack of information coming out of Calabasas.
"The last time their stock price dropped like this, the company reiterated that they had ample liquidity and capital. It's interesting that they have not made that statement today," said Frederick Cannon, analyst with Keefe, Bruyette & Woods Inc. in San Francisco.
