PHH shares dropped Monday after questions arose whether Blackstone could finance the planned buyout of the mortgage lender and vehicle-fleet manager. The agreed upon deal has GE purchasing PHH, and then selling its mortgage unit to Blackstone (full story). However, if Blackstone cannot finance the deal, GE will back out as well. The Blackstone entity which was to buy PHH sent a letter to GE saying that JP Morgan and Lehman Brothers had "revised interpretations as to the availability of debt financing under the debt commitment letter." The "revision" could lead to a "shortfall of $750 in available debt financing." PHH released a statement saying they were "not optimistic at this time" that the $1.8 billion deal would be successful. PHH shares sank 16% to $23.71 in midday trading on Monday.
Sources: Press Release, Bloomberg, Reuters
Commentary: PHH Corporation: Pennant Capital Opposes Sale, Outlines Omissions from Preliminary Proxy • Private Equity Financing: Long-Term vs. Short-Term
Stocks/ETFs to watch: PHH, BX, GE
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