Bank of America has confirmed that it will not guarantee debts at troubled sub-prime lender and buyout target Countrywide.
The bank is currently bidding to take the lender over after its finances were hit by the credit crunch.
Countrywide was heavily exposed to the US sub-prime mortgage sector, which collapsed last summer.
The $38.1 billion of debt currently held by the lender is now to remain without guarantee according to Bank of America - meaning that bondholders in the firm could face defaults in future.
This comes as part of a total outstanding debt of $97 billion held by Countrywide.
"There is no assurance that any such debt would be redeemed, assumed or guaranteed," Bank of America confirmed to the US Securities and Exchange Commission - which is overseeing the deal.
The Bank of America takeover was announced in January
Currently, Countrywide's 6.25 per cent bonds maturing in 2016 are trading at around 90 cents in the dollar, Bloomberg reports.
