Sale of 11th-Largest Servicer PHH in Doubt

PHH Corp. -- which controls the nation's 11th-largest residential servicer -- says its sale to General Electric is in doubt because investment bankers arranging the acquisition believe there will be a significant shortfall in the amount of debt financing needed.In a statement, the Mt. Laurel, N.J.-based PHH said it was informed by J.P. Morgan and Lehman Brothers that there could be a $750 million "shortfall" in debt financing. In March, General Electric Capital Corp. agreed to buy PHH in its entirety for $1.9 billion. GECC then planned to flip PHH's mortgage business (the company's biggest asset) to The Blackstone Group. Blackstone arranged to buy PHH Mortgage through a limited liability corporation called Pearl Mortgage Acquisition. In a letter sent to PHH by Pearl, Pearl said it is looking at alternative financing but is not optimistic that the sale will be completed. On Monday afternoon, PHH's shares traded down 17% to $23.74, reaching a new 52-week low. Its high is $31.52.