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PHH halts sale after banks pull financing

January 02, 2008|From Bloomberg News

PHH Corp., a mortgage and auto-leasing company, scrapped a $1.8-billion sale to General Electric Co. and Blackstone Group after Blackstone said Tuesday that banks reneged on an agreement to lend the money.

Blackstone's banks refused to finance the purchase of PHH's mortgage division, the New York-based private-equity company said in a statement. The lenders, JPMorgan Chase & Co. and Lehman Bros. Holdings Inc., declined to comment.

A record $186 billion of private-equity purchases, including the acquisitions of Harman International Industries Inc. and Affiliated Computer Services Inc., collapsed last year after losses tied to sub-prime mortgages cut demand for the higher-yielding loans and bonds used to finance buyouts. JPMorgan, Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley have offered discounts of as much as 10% to clear a backlog of debt after a record $787 billion in leveraged buyouts last year.

Mount Laurel, N.J.-based PHH "will determine in due course whether to continue to explore the company's strategic alternatives," Chairman A.B. Krongard said Tuesday. GE agreed in March to buy the whole company for $31.50 a share and keep the leasing unit.

PHH shares fell 14 cents to $17.64 on Monday, 37% less than its $27.81 price March 14, the day before the agreement was announced.

"Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available," the buyout firm said in the e-mailed statement. "We regret that the banks are now unwilling to provide financing under the terms they originally agreed to." Blackstone didn't name the banks, which PHH identified in September.

A termination fee of $50 million is being sought from Blackstone by PHH, based on the agreement's terms.

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