Fitch Upgrades PHH Outlook Based on Improved Liquidity

Fitch Ratings has upgraded its outlook on PHH Corp. to stable from negative as a sign of the improvement the Mount Laurel, N.J.-based company has made in respects to its liquidity, including demonstrated access to the unsecured debt markets at reasonable terms.

It was back in January 2012 that Fitch put PHH on negative outlook status as the company issued a $220 million add-on debt offering. This took place just months after cancelling a $250 million debt offering, and there were questions about the company having enough liquidity to pay back existing debt coming due. In the aftermath of that cancellation, then-president and CEO Jerome Selitto resigned and was replaced by Glen Messina.

Now, Fitch said PHH has more-than-sufficient cushion to meet upcoming debt maturities in 2014 and 2016 and to absorb a reasonable level of charges related to mortgage loan putbacks by secondary market purchasers.

Fitch added that it could further improve the outlook or the company’s ratings based on “PHH's ability to generate consistent operating performance, sustain improvements in liquidity, and maintain appropriate capitalization and economical access to longer term and diversified funding sources, including unsecured debt.”

But potential causes for downgrades, according to Fitch, "could be driven by a material deterioration in core operating profitability, loan repurchase losses that significantly exceed operating cash flows and other liquidity sources, increased servicing costs due to regulatory requirements, or significant adverse effects on the mortgage originations business as a result of regulatory reform.”