PHH calls of GECC merger

02-01-2008

PHH calls of GECC merger
The PHH corporation today announced it would be terminating its merger agreement with General Electric Capital corporation (GECC).

The PHH corporation and GECC, a unit of the General Electric Company, had agreed to merge on March 15th 2007.

Following the union PHH had agreed to sell its mortgage business to Pearl Mortgage Acquisition (PMA), an affiliate of the Blackstone group.

However, it was a stipulation of the merger agreement that Pearl Acquisition be "ready, willing and able to consummate" the mortgage business purchase on or before December 31st.

Pearl Acquisition was unable to fulfil this commitment, and the deal has been scrapped as a result.

Earlier this year Pearl had expressed its concern over its ability to obtain debt financing to consummate the purchase – due in part to the continued credit crunch in financial markets.

Now PHH has been informed by Pearl Acquisition this was indeed the case, and the company was not able to obtain the requisite debt financing.

In response PHH has requested payment of $50 million (£25 million) from an affiliate of the Blackstone group as a termination fee, in accordance with the terms of the merger agreement.

"I am disappointed we could not conclude the transactions contemplated by the merger agreement," said Mr AB Krongard, non-executive chairman of the board of the PHH Corporation.

"The board will determine in due course whether to continue to explore the company's strategic alternatives. The board remains focused and committed to delivering value for our stockholders regardless of the decision."

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