Countrywide shares slip; AMR stock up on plan to sell American Eagle; Darwin Evolution stock rises

By Sheri Kasprzak

New York, Nov. 28 - Even though troubled mortgage lender Countrywide Financial Corp. saw its stock improve Tuesday and early Wednesday, the stock ultimately fell on Wednesday. Still, at least one trader said he feels Countrywide has plenty of liquidity - at least for now.

After gaining a few cents early in the session, Countrywide's stock slipped by 2.79%, or 25 cents, to end the day at $8.72 (NYSE: CFC).

The mortgage lender tried to assuage investor fears about its liquidity on Tuesday after incurring criticism, most recently by New York Sen. Charles Schumer, for borrowing too much money.

Countrywide on Wednesday became the focus of a federal investigation into its foreclosure practices. In particular, the federal government is looking into two foreclosures in Florida that allegedly violated bankruptcy law.

Also on Wednesday, protesters demonstrated outside of the mortgage lender's Calabasas, Calif., headquarters, demanding Countrywide reset rates on adjustable-rate mortgages and halt foreclosure proceedings on lenders that are behind on their mortgage payments.

Even so, one trader said Wednesday that he feels Countrywide has enough liquidity to get along.

"They will be sold to the likes of [Bank of America] or a foreign bank," said the trader. "As Citibank noise shows, the merger talk going on is at levels you would never had considered possible in the past. Many will talk, some will happen. Write-offs taken, efficiencies realized, new capital sees reason to invest and stock [goes] up. Been there."

As for Schumer's attack on Countrywide, the trader said it appears to be politically motivated.

"Schumer runs around, yelling for banks to make more loans, help out poor folks underwater with their mortgages," the trader said. "Then [he] goes [and] attacks CFC."

Meanwhile, Citigroup's stock was up 6.5%, or $1.97, to end the day at $32.29 (NYSE: C). After the closing bell, the stock slipped by 11 cents.

American Eagle sale ups AMR stock

Elsewhere, AMR Holdings said Wednesday that it is looking to sell regional airline American Eagle.

The news sent shares up 6.91%, or $1.42, to end at $21.98 (NYSE: AMR). In after-hours trading, the stock gained another 17 cents.

"I think it's necessary," said one sellside trader. "There are a lot of factors that make it a necessity, like higher oil prices and it just lends a lot of uncertainty. If they can pare down, so much the better."

"This decision comes after a careful and deliberate evaluation of the strategy that will best enable us to continue to create value for our shareholders," said AMR CEO Gerard Arpey in a news release.

A pilot's organization said it hopes the change in corporate culture for American Eagle will lead to a bargaining agreement.

"Any new ownership would be subject to our existing collective bargaining agreement, which contains protections for our pilots in the event of a sale or merger," said Herb Mark, chairman of the American Eagle pilots' union, in a news release.

"Regardless of who owns American Eagle, nothing is more important to ALPA [Airline Pilots' Association] than resolving the issues that have created strained labor relations between the pilots and management."

Darwin to buy Agency Marketing

In merger news, Darwin Evolution Underwriters, Inc.'s subsidiary, Evolution Underwriting, Inc., agreed to buy Agency Marketing Services, a private liability program manager and wholesale insurance broker.

Darwin's stock gained $1.34 on Wednesday to end the session at $24.39, a 5.81% gain (NYSE: DR).

Once the deal is done, Boyd Wolf and David Gough, principals of Tampa's Wolf Professional Risk organization, will lead Agency Marketing, a statement from Darwin said Wednesday.

Though the terms of the deal were not released Wednesday, a statement said the transaction is expected to close by the end of the year.

"I believe that in Boyd Wolf and David Gough, we've found the kind of leadership that AMS's industry partners and their clients can rely on for continued high service standards," said Kevin Schuck, the founder of Agency Marketing, in a news release.

Hilltop may buy Downey

A trader on Wednesday said he "likes" Hilltop Holdings Inc., a company that may be buying out Downey Financial Corp.

Last week, Hilltop indicated it has designs on Downey for potential long-term strategies, which include a business combination.

Another sellside trader on Wednesday said the merger is "highly likely" and that it will probably be a success.

"It seems like it should be a good thing," said the trader. "If not Downey, I have a feeling they're going to be making some major purchase either at the end of this year or the beginning of next. It's definitely something to keep an eye on."

Shares of Hilltop climbed by 2.79%, or 30 cents, on Wednesday to close at $11.05 (NYSE: HTH).

Downey's stock gained 8.76%, or $2.98, to end the day at $36.99 (NYSE: DSL).

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