Private Equity Fund Pushes Break-Up of PHH

MOUNT LAUREL, N.J. – Pennant Capital Management, an investment fund seeking to scotch the pending takeover of PHH Corp., pressed its case Friday for a spin-off of the company’s mortgage operations, which includes the largest mortgage bank for credit unions. But Pennant, which has built a 9.4% stake in the mortgage and fleet management concern, has an uphill fight to convince other shareholders as PHH’s shares remain mired almost 20% below the $31.50 a share offered by GE Capital. PHH shares closed Friday at $25.95, up slightly from Thursday’s close of $25.59. Rather than sell the whole company to GE Capital for $1.8 billion, then have GE Capital sell the country’s 10th largest mortgage bank to private equity fund The Blackstone Group, Pennant wants management to sell the mortgage business separately. In a letter to management Friday, Alan Fournier, managing director of Pennant, said such a strategy could fetch as much as $35 a share for all of PHH. PHH, which has originated mortgages for hundreds of credit unions for years, became credit unions’ largest mortgage bank when it bought the mortgage operations of CUNA Mutual Group in 2005. That included more than 100,000 residential mortgages and a loan servicing portfolio of more than $12 billion, as well as relationships with more than 2,000 credit unions.