PHH Corp., the nation's 11th largest mortgage servicer according to National Mortgage News, warned today that its $1.8 billion sale to Blackstone and GE may collapse as numerous investment banks shy away from funding leveraged buyouts. PHH's mortgage operations were to be bought by an affiliate of Blackstone, while GE planned to keep the company's vehicle-leasing unit. According to a press statement issued today, JP Morgan Chase and Lehman Brothers provided Blackstone with "revised interpretations as to the availability of debt financing," leading to a potential shortfall of $750 million. Blackstone said it believed that the "revised interpretations were inconsistent with the terms of the debt commitment letter," and that it will continue to seek either full funding or alternative sources of capital. The written statement says all parties are "not optimistic" that additional funding will be located, however, suggesting that the deal is close to collapse. Bloomberg reports that should Blackstone's funding fall through, all bets are off:
"We continue to hope that Blackstone will succeed in arranging its financing so the merger can be completed," Stephen White, a spokesman for Fairfield, Connecticut-based GE, said in an interview today. "But if Blackstone is unable to complete its purchase, GE will not be obligated to complete the merger."
Of course, that stance is at odds with PHH's view of the matter, which said it expects GE to "fulfill its obligations under the merger agreement," irrespective of the outcome at Blackstone. Sound familiar?