PHH Sale to GE and Blackstone Terminated

January 2, 2008 No Comments »

PHH Corp. said Tuesday that its proposed $1.8 billion merger with General Electric and Blackstone was scrapped after the private equity firm failed to obtain the necessary financing to complete the sale.

In March, GE and Blackstone had agreed to buy PHH, with GE retaining the company’s vehicle fleet unit and immediately selling PHH Mortgage to Blackstone after the deal closed.

But months later, J.P. Morgan and Lehman Brothers said they were unwilling to provide roughly $750 million of the $3.5 billion in financing needed to complete the deal, citing the sinking value of mortgage-related securities.

And just minutes into 2008, PHH officially killed the deal after the merger’s December 31, 2007 deadline passed.

“I am disappointed that we could not conclude the transactions contemplated by the Merger Agreement,” said A. B. Krongard, non-executive Chairman of the Board of the Company.

“The Board will determine in due course whether to continue to explore the Company’s strategic alternatives.”

Pursuant to the termination, PHH has sought a termination fee of $50 million from the Blackstone Group, though the parties involved don’t appear to feel liable.

“We regret that the banks are now unwilling to provide financing under the terms they originally agreed to,” Blackstone said in a statement.

“Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available,” the company said. “We regret that the banks are now unwilling to provide financing under the terms they originally agreed to.”

Meanwhile, a JP Morgan Chase spokesman said, “J.P. Morgan has always been willing to stick to the terms of the original commitment.” “However, the buyers failed to deliver adequate collateral and documentation required for the financing, ultimately undermining the transaction.”

A GE spokesman said, “We regret and are disappointed that the deal won’t close.” “We have no further obligation or liability.”

Lehman Brothers declined to comment.

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