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Last Updated: Tuesday, 8 January 2008, 21:30 GMT
Mortgage giant denies bankruptcy
The exterior of the Countrywide home loans office in San Mateo, California
Countrywide reported losses of $1.2bn in October
US mortgage giant Countrywide Financial has denied speculation it is set to file for bankruptcy protection.

Countrywide made the statement after shares in America's largest mortgage lender fell as much as 25% in Tuesday trading on Wall Street.

The shares recovered some ground after the firm's comments, but still ended the day down 21% at $7.84.

Countrywide reported a $1.2bn (584m) loss in October, hit by the sharp downturn in the US housing market.

'No substance'

In its statement, the company said there was "no substance to the rumour that Countrywide is planning to file for bankruptcy".

Countrywide is severely challenged and might falter if it does not receive an infusion of at least $4bn within the next couple of weeks
Credit rating agency Egan-Jones Ratings

It added: "And we are not aware of any basis for the rumour that any of the major rating agencies are contemplating negative action relative to the company."

Yet while Countrywide says its finances are in good shape, some analysts are not so sure.

Credit rating agency Egan-Jones Ratings told the Reuters news agency that Countrywide "is severely challenged and might falter if it does not receive an infusion of at least $4bn within the next couple of weeks".

The US housing market has contracted sharply over the past year in the face of higher mortgage rates, which have led to record mortgage default levels, particularly in the sub-prime sector.

The result has been falling house prices, and increasing numbers of Americans either unwilling or unable to join the housing market.

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