PHH Deal Snags as Stockholder Vote Looms

MOUNT LAUREL, N.J. – Shares in PHH Corp. yesterday traded down 17% after private equity giant The Blackstone Group disclosed it was having trouble financing the buyout of the company’s mortgage business, the biggest mortgage bank for credit unions. PHH said it will push forward with the $31.50 a share sale to GE Capital, which plans to retain PHH’s fleet business and sell the mortgage operations to The Blackstone Group. PHH said Blackstone told GE Capital that it may be as much as $750 million short on financing its part of the deal. PHH told shareholders yesterday it still expects GE Capital to complete its share of the deal. Shareholders of PHH are scheduled to vote on the deal next Wednesday. PHH acquired the mortgage business of CUNA Mutual Group in 2005, making it the largest mortgage bank for credit unions. The business consisted of 100,000 residential loans in a $12 billion loan servicing portfolio and relationships with as many as 2,000 credit unions. PHH shares closed down $4.26, or 15%, yesterday, at $24.24.