Blackstone faces $50m PHH bill

Not much new year cheer at PHH – the US company plans to hit private equity firm Blackstone with a hefty bill after its $1.8bn sale fell through.

Last Updated: 31 Aug 2010

It's the latest deal to be torpedoed by the credit crunch. Blackstone had planned to team up with General Electric to buy and then break up PHH, a mortgage lending and car fleet management company, but back in September it emerged that the two groups were having trouble raising the required debt package. Since Blackstone wasn’t prepared to stump up the difference, the process stalled – and now the final deadline of December 31 has been and gone. As a result, PHH says it’s owed a $50m break fee.

Naturally, everyone seems to be blaming everyone else. PHH is sending the bill to Blackstone, according to its press release – but the buyout firm is blaming the lending banks (reportedly led by JP Morgan and Lehman Brothers) for reneging on the original deal. ‘We regret that the banks are now unwilling to provide financing under the terms they originally agreed to,’ Blackstone said sniffily yesterday. Some bankers are even suggesting that the break fee doesn’t even apply, because the deal didn’t get far enough along the line.

Either way it’s all a bit of an embarrassing start to 2008 for Blackstone, which prides itself on its relationship with banks and its ability to get deals done. This was a relatively small deal by its lofty standards, but it was vulnerable because of PHH’s exposure to US mortgage assets. That meant the lending banks had even less chance of shifting the debt off their books afterwards – and this is hard enough anyway at the moment because there are so few buyers in the market.

So just in case you’d started thinking that sub-prime mortgage woes were so 2007, think again – this is a story that’s going to run and run. At this rate, Blackstone boss Stephen Schwarzman should perhaps save his millions this year and have his birthday party at Pizza Hut instead...

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Could coronavirus lead to gender equality?

Opinion: Enforced home-working and home-schooling could change the lives of working women, and the business...

Mike Ashley: Does it matter if the public hates you right now?

The Sports Direct founder’s response to the COVID-19 pandemic has drawn criticism, but in the...

4 films to keep you sane during the coronavirus lockdown

Cirrus CEO Simon Hayward shares some choices to put things in perspective.

Pandemic ends public love affair with Richard Branson et al

Opinion: The larger-than-life corporate mavericks who rose to prominence in the 80s and 90s suddenly...

The Squiggly Career: How to be a chief strengths spotter

When leading remotely, it's more important than ever to make sure your people spend their...

"Blind CVs don't improve your access to talent"

Opinion: If you want to hire socially mobile go-getters, you need to know the context...