Market Doubts PHH Deal

MOUNT LAUREL, N.J. – Shares in PHH Corp. traded up slightly yesterday after shareholders overwhelmingly approved the takeover of the largest mortgage bank for credit unions by GE Capital. But the shares still traded 16% below the $31.50 a share price of the takeover, indicating great doubt by investors that the deal will be completed. Investors’ doubts were fueled last week when private equity giant the Blackstone Group said it was having trouble raising money for its end of the buyout, an acquisition of PHH’s mortgage business, which includes the remnants of CUNA Mutual Mortgage it acquired in 2005. As a result, PHH owns more than $12 billion in residential mortgages originated by credit unions and has relationships with more than 2,000 credit unions. Under the original terms of the deal, GE Capital is supposed to buy PHH Corp. for $1.8 billion, then retain PHH’s fleet management business and sell the mortgage business to Blackstone. Some investors are wondering if GE will want to complete the deal if it cannot sell the mortgage business, which consists of a $150 billion servicing portfolio, 11th largest in the country. PHH shares closed yesterday at $26.32, up 2% after the shareholder vote.