NEW YORK (AP) - Moody's Investors Service may cut its ratings on Bank of America Corp.'s credit after the bank said it planned to buy Countrywide Financial Corp., the credit-rating agency said Friday.
Moody's will review Bank of America for a possible downgrade based on the bank's ability and willingness to raise capital to support its balance sheet after completing the acquisition. Bank of America currently carries an investment-grade 'Aa1' rating from Moody's.
Earlier Friday, Bank of America said it would acquire the nation's largest mortgage lender and servicer in an all-stock deal valued at about $4 billion.
Moody's said the acquisition poses risks because of deterioration in the mortgage market, challenges to integrating the lender and potential litigation.
Separately, Standard & Poor's and Fitch Ratings affirmed their ratings for Bank of America. Bank of America carries investment-grade 'AA' ratings from both ratings agencies.
Fitch said its outlook on Bank of America remains negative.
Meanwhile, the three major ratings agencies are considering upgrading Countrywide's credit because if the deal is completed the Calabasas, Calif.-based lender's debt would be assumed by a bigger company with more diverse sources of revenue.
S&P, which cut Countrywide's rating in October to 'BBB+,' or 'lower medium grade,' after the company reported a $1.2 billion loss for the third quarter, said it will probably upgrade Countrywide's debt to the same rating as Bank of America, which is 'AA,' or high quality.
Moody's placed Countrywide's ratings on review for a possible upgrade. Becoming part of a 'highly rated entity which has superior franchise strength' would help provide benefits to Countrywide's creditors and depositors, Moody's said in a statement.
Fitch also said it is considering upgrading Countrywide to align with its ratings on Bank of America.
Given the recent tumult in the world of corporate takeovers, S&P said its outlook on Countrywide's credit will hinge on developments in this deal and how likely it is to close.
(This version CORRECTS the description of 'BBB+' to 'lower medium grade,' rather than 'junk.')
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