BofA takeover of Countrywide on track despite losses; new suitors for Nymex?; Consol bids for CNX

By Evan Weinberger

New York, Jan. 29 - A $422 million fourth-quarter loss for Countrywide Financial Corp. isn't putting the brakes on Bank of America Corp.'s takeover of the company.

"At this point, everything is a go to complete this transaction," Bank of America CEO Kenneth Lewis said at a Citigroup investors conference Tuesday, according to Bloomberg.

The statement came in the wake of Countrywide's announcement of its big fourth-quarter losses. There has been some uncertainty that the deal would go through ever since its announcement Jan. 11.

The Calabasas, Calif.-based mortgage lender lost 79 cents per share in the last three months of 2007. In the same period in 2006, Countrywide posted a $622 million, or $1.01, profit.

A Thomson Financial poll of analysts predicted a loss of 30 cents per share for Countrywide. Reuters Estimates had pegged Countrywide for a loss of 32 cents per share.

Countrywide's fourth-quarter losses were about a third of the $1.2 billion it lost in the third quarter.

Countrywide, the largest home lender in the United States, had to set aside $924 million to cover credit losses during the quarter, most of them bad loans. It had a $73 million reserve in the fourth quarter of 2006.

More than a third of subprime mortgage holders were behind on payments to Countrywide, the company announced in its earnings report.

And Countrywide wrote down more than $830 million in prime mortgages for the quarter. There were also losses in the secondary mortgage market.

"While considerably improved from the previous quarter, Countrywide's results for the fourth quarter of 2007 were adversely impacted by further credit deterioration across the industry and continued illiquidity in the secondary mortgage markets," said Angelo R. Mozilo, Countrywide's chairman and CEO.

Market watchers said that Countrywide was just laying the groundwork for Bank of America to save the day. The 15 cent dividend Countrywide announced goes a long way in that regard, one said.

"[Countrywide's just taking the hits ahead of the deal as per [Bank of America] direction, so that when the deal closes [BofA] will report positive effects of the deal," a trader said. "The fact that they announced a dividend means all is rosy to that end."

For his part, Lewis told the Citigroup conference that Bank of America expected Countrywide's quarterly results, saying they were part of BofA's "due diligence" in the run-up to the deal.

"The week before, they might not have known," another trader said.

Lewis said that the improvements in loan issuance at Countrywide as the Federal Reserve has cut rates was more important to him than the quarterly loss, the Associated Press said. "Much more important to us is the dramatic improvement in the underlying fundamentals of the mortgage business," Lewis said.

Lewis' bullishness on the deal drove up Countrywide stock Tuesday. Countrywide (NYSE: CFC) picked up 36 cents, or 6.05%, for a $6.31 close.

Bank of America stock (NYSE: BAC) gained 74 cents, or 1.80%, to close at $41.94 on the day.

Speaking of rate cuts...

Hopes for a further 50 basis point cut in the Federal Funds rate at the conclusion of the Fed's meeting Wednesday drove another day of gains on Wall Street Tuesday. An unexpected surge in durable goods orders in December didn't hurt, either.

The Dow Jones Industrial Average moved up 96.14 points, or 0.78%, to close at 12,480.30.

The Nasdaq gained 8.15 points, or 0.35%, to close at 2,358.06.

And the Standard & Poor's 500 closed at 1,362.30, a gain of 8.33 points, or 0.62%

Could other bidders come for Nymex?

As soon as the CME Group Inc. and Nymex Holdings Inc. confirmed market rumors that they were in talks on a potential $11 billion merger, talk switched to what other exchanges might make a competing bid.

While NYSE Euronext Inc. was the hot name, another potential suitor has come up for Nymex, the New York-based parent company of the New York Mercantile exchange.

"That or there is still a chance that the New York Stock Exchange might come in there. But I think that's unlikely," one market watcher said. NYSE Euronext recently snapped up the American Stock Exchange.

That other potential suitor is the Intercontinental Exchange Inc. - an Atlanta-based commodities exchange.

The Intercontinental Exchange had previously lost the bidding on the Chicago Mercantile Exchange in July. The Chicago Board of Trade bought its rival to form the CME Group.

The market watcher said that even in the Intercontinental Exchange, CME would stand firm. "If there's another bid, CME will just raise its bid," he said.

Nymex stock (NYSE: NMX) slipped 42 cents, or 0.36%, to $116.08 on Tuesday.

CME stock (NYSE: CME) lost $8.00, or 1.28%, for a $617.00 close.

And the InterContinental Exchange (NYSE: ICE) gained $1.64, or 1.17%, to close at $141.89 on the day.

Consol wants rest of CNX

Consol Energy Inc. already owns close to 82.7% of the stock in its subsidiary, CNX Gas Corp. On Tuesday, the Pittsburgh-based coal miner offered to buy up the rest of CNX's outstanding common stock not under its control.

The deal would be a stock-for-stock transaction, with CNX shareholders receiving a 0.4425 share of Consol stock. In a press release, Consol said that would be equal to $33.70 for each share of Pittsburgh-based CNX stock, representing a 12% premium on CNX's closing stock price Monday. There are about 151 million shares of CNX stock outstanding, according to Consol. The company valued the deal at around $932 million.

Consol president and CEO J. Brent Harvey said the deal was necessary to diversify Consol's holdings with changes in energy policy coming. "It is becoming increasingly apparent that carbon constraints will become a part of energy regulation in the United States," Harvey said in the statement. "Such constraints pose challenges for all fossil fuels, but would affect gas to a lesser extent than coal or petroleum."

Consol set up CNX as an independent company two years ago, the statement said.

Both companies announced earnings Tuesday, and neither was stellar.

Consol's profits were way down in the last three months of 2007. A collapsed roof that shut down one of the company's mines for the entire period drove earnings down to $6.8 million, or 4 cents per share, for the quarter.

In the last three months of 2006, Consol earned $115.3 million, or 62 cents per share.

Thomson Financial estimated Consol's profits at 34 cents per share for the quarter.

Consol stock (NYSE: CNX) was down $3.16, or 4.15%, to close at $73.00.

Consol's roof collapse cut CNX's production as well. CNX announced that its profits had fallen 22% for the fourth quarter of 2007. It had profits of $29.9 million, or 20 cents per share, in the quarter. In the same period the previous year, CNX earned $38.2 million, or 25 cents per share.

Thomson Financial had anticipated CNX to earn 26 cents per share for the quarter.

But the Consol bid drove up the company's stock. CNX stock (NYSE: CXG) gained $4.53, or 15.05%, to close at $34.63.

CNX Gas formed a special committee of its board of directors to study the Consol offer, the company announced Tuesday.

CNX stressed that the Consol offer had only been proposed, not tendered. The statement said the board would announce its recommendation upon the start of the tender offer, which will be completed in 10 days once it begins. "CNX Gas requests its stockholders to defer making a determination whether to accept or reject the exchange offer until they have been advised of the position of the CNX Gas special committee with respect to the exchange offer," the company said.

Excel Maritime welcomes Quintana aboard

Excel Maritime Carriers Ltd. and Quintana Maritime Ltd. announced that the two had agreed to a merger worth about $2.45 billion Tuesday morning.

The deal will make the combined Excel one of the largest dry bulk shipping fleets in the world.

Both maritime shippers are based in Greece - Excel in Athens and Quintana in Glyfada.

Quintana stockholders will receive $13 and 0.4084 share of Excel stock for their shares. That translates to a price of $33.80 for each share of Quintana stock, a 57% premium on Quintana's closing stock price on Monday and a 34% premium to company's average close for the last 30 days.

If Excel shares move higher than $45, then the company will change the stock ratio it will give as part of the deal to maintain the $33.80-per-share price.

"This is a highly attractive offer for Quintana," said Stamatis Molaris, president and CEO of Quintana, in a news release. "By capturing significant value in cash and retaining equity upside via stock in the combined company, we believe that we are delivering the ideal value combination to our shareholders."

Molaris will take over as CEO of Quintana when the deal goes through, which is expected in the second quarter of this year.

Excel calls the deal a "transformational transaction." When the deal is completed, Excel will operate a fleet of 47 ships with a 3.7 million dry weight ton carrying capacity. Excel said a further eight ships will sail under its name by the end of 2010, bringing its total shipping capacity to 5.2 million DWT.

The company's fleet will average 8.1 years in service, making it one of the youngest in the world, Excel and Quintana said in their statement. The shipping company will transport goods for several blue chip companies, including Bunge Ltd., BHP Billiton Ltd. and Cargill Inc.

Excel Maritime stock (NYSE: EXM) sank $1.22, or 3.70%, to close at $31.78 on the news.

Quintana (Nasdaq: QMAR) steamed ahead $5.13, or 30.37%, to $22.02 on the day.

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