" Countrywide Financial Corp., , the biggest U.S. mortgage lender, fell 13 percent, the most since the 1987 stock market crash, after Merrill Lynch & Co. raised the possibility of bankruptcy.
"Effective insolvency" would result if creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note Wednesday.
Shareholders shouldn't "understate the importance of liquidity," Bruce wrote.
Countrywide's shares have lost almost half their value this year on concern a credit crunch in the mortgage industry will erode profit.
Bankers have curtailed lending to mortgage providers and demanded more collateral, forcing more than 70 companies to seek buyers or shut down since the start of last year.
Last week, Countrywide said it had access to about $187 billion in credit. Chief Executive Officer Angelo Mozilo assured investors that the company has enough cash to cope with the market turmoil, and said it may even benefit as competitors are forced out of business. "