US mortgage lender Countrywide Financial said last night it drew down an entire $11.5 billion bank credit line as a global credit crisis limits its access to short-term cash.
The drawdown should help Countrywide, the largest US mortgage lender, conduct daily operations. It shows how liquidity strains have spread beyond subprime lenders to companies that mainly offer higher-quality loans, driving several into bankruptcy.
All three major US credit rating agencies downgraded Countrywide debt, and at least two analysts have raised the spectre of bankruptcy for the lender.
Countrywide shares fell as much 29.6 per cent before paring losses amid a rally among financial services stocks, including mortgage rivals that might benefit if Countrywide struggles. The shares closed down $2.34, or 11 per cent, at $18.95, their lowest level since September 2003.
Countrywide said it has tightened its lending standards so most new home loans will qualify for purchase and guarantee by mortgage companies Fannie Mae and Freddie Mac. Such loans are considered among the least likely to default.
Countrywide said the $11.5 billion line came from 40 banks, and that more than 70 per cent had a term of greater than four years.