In another sign that troubles within the mortgage industry will continue into 2008, one of the largest originators of residential-home loans...
NEW YORK — In another sign that troubles within the mortgage industry will continue into 2008, one of the largest originators of residential-home loans announced Tuesday it is scrapping a planned $1.8 billion sale because banks had failed to agree to finance the transaction.
PHH, a New Jersey-based mortgage and vehicle-leasing company, said in March it was selling itself for $1.8 billion to General Electric and the Blackstone Group, a large private-investment company.
But as the mortgage industry continued to deteriorate, the banks financing the transaction — JPMorgan and Lehman Brothers — slashed the deal’s loans by as much as $750 million in September.
PHH said Tuesday it was ending the sale because Blackstone, which was to acquire the mortgage business, had failed to find alternative financing.
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The termination is an embarrassment for Blackstone, which has a reputation for closing deals even in the face of obstacles, and a disappointment for General Electric, which had wanted PHH’s vehicle-leasing business.
“We remain committed to the fleet-services space, and this would have been a perfect fit,” said GE spokesman Stephen White. “We wanted to do the transaction.”
A source close to Blackstone said the company had pushed lenders to honor their financing agreements but had been unable to convince them PHH’s mortgage business was worth the price estimated in March, when the mortgage markets were steadier.
Blackstone was unwilling to pay the difference itself, said the source, who requested anonymity.
It is unclear what the collapse means bodes for PHH. In July, the company’s stock was near the $31.50 a share the acquisition had promised.
Monday, it closed at $17.64. Markets were closed Tuesday. PHH’s nonexecutive chairman, A.B. Krongard, expressed disappointment at the cancellation, saying there “can be no assurance that any further exploration of strategic alternatives that the board may determine to undertake will result in any agreement or transactions.”
Under the terms of the deal, Blackstone is liable for a $50 million termination fee to PHH.
Last month, tax-preparation company H&R Block said it would close its mortgage-lending arm after the private-equity firm Cerberus Capital Management walked away from a deal to buy it for $300 million.