Hedge Fund Seeks Block on PHH Deal

WALL STREET – Hedge fund Pennant Capital Management LLC continued to press its bid to stop the takeover of PHH Corp., the largest mortgage bank for credit unions, urging a spin-off of the mortgage bank from the company’s fleet business, instead. In a letter to the PHH board on Monday, Pennant, which has built an 8% stake in PHH, said the spin-off could provide greater value to shareholders than the agreement to sell the company for $31.50 a share to GE Capital, which would then sell the mortgage business to private equity giant The Blackstone Group. PHH, which has long provided mortgage banking services to hundreds of credit unions, became the largest mortgage bank for credit unions when it acquired CUNA Mutual Group’s mortgage business in the fall of 2005. That business included relationships with more than 1,000 credit unions and a servicing portfolio consisting of more than 100,000 residential mortgages valued at over $12 billion. Pennant said the PHH board neglected to explore the spin-off option and said the actions described in the company’s proxy leading up the sale “paint a picture of a seller in panic mode as bidders were dropping out and even Blackstone blinked at the eleventh hour.” “Importantly, the issues that caused this panic were either irrelevant (sub prime meltdown) or self-inflicted and temporary (inability to produce financial statements, failure to cut capacity heading into the declining mortgage market). It is clear you merely sought to do the best you could in a desperation auction of the Company, without giving serious consideration as to whether the Company should be sold in the first place.” PHH, itself, was spun off in 2005 from Cendant Corp.