PHH CORPORATION (NASDAQ:PHH) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive
Agreement.
Agreement for the Purchase and Sale of Servicing
Rights
On December28, 2016, PHH Corporation (PHH, the Company, we or
our) announced that it entered into an Agreement for the Purchase
and Sale of Servicing Rights by and between New Residential
Mortgage LLC (NRZ), PHH Mortgage Corporation (PHH Mortgage) and,
solely for the limited purposes set forth therein, PHH (the Sale
Agreement) to sell to NRZ all of PHH Mortgages portfolio of
Mortgage Servicing Rights (MSRs) as of October31, 2016, excluding
the Ginnie Mae MSRs that were part of the sale transaction
announced in November2016 (the MSR Portfolio), together with all
servicing advances related to the MSR Portfolio. In addition, PHH
and NRZ entered into a Flow Mortgage Loan Subservicing Agreement
(the Subservicing Agreement) to which PHH will subservice the MSR
Portfolio for an initial period of three years, subject to
certain NRZ termination rights.
The MSR Portfolio had a book value of $541 million as of
September30, 2016 and related serving advances of $307 million
(the Servicing Advances) as of October31, 2016. Based on the MSR
Portfolio composition as of October31, 2016 and market conditions
as of the date of the Sale Agreement, total proceeds are expected
to be approximately $912 million, of which approximately $612
million is a fixed purchase price for the sale of the MSR
Portfolio and approximately $300 million is related to the sale
of servicing advances. The MSR proceeds exclude estimated
transaction fees and expenses of approximately five percent of
MSR value, and represent a valuation of 84 basis points on total
UPB of approximately $72 billion as of October31, 2016. PHHs
MSR-related hedges, including those related to the Ginnie Mae
MSRs, have experienced aggregate realized and unrealized losses
of approximately $135 million since September30, 2016, and the
Company is terminating its related hedge positions in conjunction
with the signing of the Sale Agreement.
The sale of the MSR Portfolio to the Sale Agreement is subject to
certain conditions precedent, including anti-trust approval, the
execution of a portfolio recapture and retention agreement with
NRZ, the approval of Fannie Mae, Freddie Mac and private mortgage
loan investors, the consent of certain private label mortgage
loan origination sources and stockholder approval. The Sale
Agreement provides NRZ and PHH and PHH Mortgage with certain
termination rights. If the Sale Agreement is terminated under
specified circumstances, including with respect to a competing
proposal, PHH will pay NRZ a termination fee equal to three and a
half percent of the purchase price for the MSR Portfolio.
Furthermore, if certain material adverse events occur with
respect to PHH prior to the initial sale date, NRZ shall have the
right to terminate the Subservicing Agreement and, upon any
exercise of such termination right by NRZ, PHH would have the
option to either sell the MSR Portfolio on a
subservicing-released basis or pay a $10 million termination fee.
The Board of Directors of PHH has unanimously agreed to recommend
that the holders of the Common stock of PHH approve the sale of
the MSR Portfolio to the Sale Agreement, and has agreed not to
solicit alternative transactions, subject to customary
exceptions.
to the terms of the Sale Agreement, each party shall indemnify
the other for breaches of its representations and warranties,
breaches of its covenants and certain other matters. Subject to
certain exceptions, PHHs indemnification obligations under the
Sale Agreement with respect to (i)Fannie Mae and Freddie Mac
MSRs, collectively, are capped at five percent of the related
purchase price and (ii)MSRs relating to mortgage loans held by
private investors are capped at five percent of the related
purchase price. The representations and warranties set forth in
each Asset Purchase Agreement generally survive 3 years following
the closing.
The initial sale of the MSR Portfolio to the Sale Agreement is
targeted for closing during the second quarter of 2017, but in no
event later than the third quarter. There can be no assurance
that the sale of the MSR Portfolio contemplated by the Sale
Agreement will close as contemplated, if at all. There is no
pre-existing relationship between NRZ and the Company.
The Company expects that substantially all of the proceeds from
the sale of the MSR Portfolio will be used to repay PHHs senior
unsecured notes and borrowings under the Companys servicing
advance facility and to pay taxes. Upon the initial closing to
the Sale Agreement, the Company expects it would be required to
make an Offer to Purchase its senior unsecured notes, under the
terms of its bond indentures, at a purchase price equal to 101%
of the outstanding principal amount.
The foregoing description of the Sale Agreement does not purport
to be complete and is qualified in its entirety by reference to
the Sale Agreement, which is filed as Exhibit2.1 hereto and is
incorporated herein by reference.
Flow Mortgage Loan Subservicing
Agreement
In connection with the execution of the Sale Agreement, PHH
Mortgage and NRZ entered into a Subservicing Agreement, which
becomes effective upon the initial sale of MSRs under the Sale
Agreement. to the Subservicing Agreement, PHH Mortgage will be
retained by NRZ as a subservicer for the MSR Portfolio, which
represents approximately 480,000 mortgage loans. The
Subservicing Agreement provides for an initial term of 3 years,
during which PHH Mortgage does not have right to resign without
NRZ consent. During the initial 3-year term, for a deboarding
fee, NRZ may terminate the Subservicing Agreement: (a)with
respect to any MSRs sold by NRZ; (b)if an agency terminates NRZ
as an authorized servicer not arising from breaches by PHH
Mortgage; and (c)if NRZ desires to transfer the subservicing
responsibilities with respect to a portion of the MSRs, not to
exceed the following thresholds: 0% in year 1, 25% in year 2,
and 25% in year 3. NRZ may also terminate the Subservicing
Agreement upon the occurrence of certain events of default,
including a change of control of PHH Corporation or PHH
Mortgage or the failure of PHH Mortgage to satisfy certain
financial covenants.
The foregoing description of the Subservicing Agreement does
not purport to be complete and is qualified in its entirety by
reference to the Subservicing Agreement, which is filed as
Exhibit10.1 hereto and is incorporated herein by reference.
Item 8.01. Other Events.
On December28, 2016, PHH issued a press release announcing its
entry into the Sale Agreement, which is filed as Exhibit99.1
hereto and is incorporated herein by reference.
On December14, 2016, PHH Mortgage extended its committed
purchase facility for early funding with Fannie Mae until
March31, 2017 in order to allow both PHH Mortgage and Fannie
Mae to evaluate facility needs and terms following the
conclusion of the Companys strategic review process. At the
request of PHH Mortgage in order to reduce non-usage and
commitment fees in light of expected lower facility
utilization, Fannie Maes commitment to purchase mortgage loans
or pools of mortgage loans at any time was reduced to an
aggregate principal balance of $150 million from a prior
aggregate principal balance of $300 million.
On December22, 2016, PHH Mortgage extended its mortgage loan
repurchase facility with Bank of America, N.A. (BANA) until
March31, 2017 in order to allow both PHH Mortgage and BANA to
evaluate facility needs and terms following the conclusion of
the Companys strategic review process. At the request of PHH
Mortgage in order to reduce non-usage and commitment fees in
light of expected lower facility utilization, BANAs commitment
to purchase mortgage loans at any time was reduced to an
aggregate principal balance of $350 million from a prior
aggregate principal balance of $400 million.
Item 9.01. Financial Statements and
Exhibits.
(d)Exhibits
|
Exhibit Number |
|
Description |
|
2.1* |
Agreement for the Purchase and Sale of Servicing Rights, |
|
|
10.1** |
Flow Mortgage Loan Subservicing Agreement, dated as of |
|
|
99.1 |
PHH Corporation press release dated December28, 2016. |
* The schedules and exhibits to this agreement have been
omitted in accordance with Item 601(b)(2)of Regulation S-K. A
copy of any omitted schedule or exhibit will be furnished to
the Securities and Exchange Commission upon request.
** Confidential treatment has been requested for certain
portions of this Exhibit to Rule24b-2 under the Securities
Exchange Act of 1934, as amended, which portions are omitted
and filed separately with the SEC.
Additional Information and Where to Find It
In connection with the proposed transaction, PHH will file a
proxy statement with the Securities and Exchange Commission
(SEC). Stockholders are strongly advised to read the proxy
statement and any other relevant documents filed with the SEC
as they become available because they will contain important
information about the proposed transaction.
Stockholders may obtain a copy of the proxy statement when
available along with other documents filed by the Company, free
of charge, by contacting PHH Investor Relations: in writing at
PHH Corporation, 3000 Leadenhall Road, Mt. Laurel, NJ 08054, by
telephone at 856-917-7405, by email at
InvestorRelations@phhmail.com, or by accessing the PHH website
at www.phh.com, or the SEC website at www.sec.gov.
Participants in Solicitation
The Company and its directors, executive officers, and certain
other members of its management and employees may be deemed to
be participants in the solicitation of proxies from its
stockholders in connection with the proposed transaction.
Information concerning PHHs directors and executive officers is
set forth in the proxy statement for PHH 2016 annual meeting of
stockholders as filed with the SEC on Schedule 14A on April28,
2016, and in its most recent Annual Report on Form10-K for the
fiscal year ended December31, 2015 as filed with the SEC on
February26, 2016. Information regarding the interests of such
directors and executive officers in the solicitation will be
more specifically set forth in the proxy statement concerning
the proposed transaction that will be filed with the SEC. In
addition to the proxy statement, PHH files annual, quarterly
and special reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or
other information at the SEC public reference room in
Washington, D.C. Please call the SEC at 1-800-SEC-3030 for
further information on the public reference rooms. PHHs filings
with the SEC are also available to the public from commercial
document-retrieval services and at the website maintained by
the SEC at http://www.sec.gov.
Forward-Looking Statements
Certain statements in this Current Report on Form8-K are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Generally, forward
looking-statements are not based on historical facts but
instead represent only our current beliefs regarding future
events. All forward-looking statements are, by their nature,
subject to risks, uncertainties and other factors that could
cause actual results, performance or achievements to differ
materially from those expressed or implied in such
forward-looking statements. Investors are cautioned not to
place undue reliance on these forward-looking statements. Such
statements may be identified by words such as expects,
anticipates, intends, projects, estimates, plans, may increase,
may fluctuate and similar expressions or future or conditional
verbs such as will, should, would, may and could.
You should understand that forward-looking statements are not
guarantees of performance or results and are preliminary in
nature. You should consider the areas of risk described under
the heading Cautionary Note Regarding Forward-Looking
Statements and Risk Factors in our periodic reports filed with
the U.S. Securities and Exchange Commission, including our most
recent Annual Report on Form10-K and Quarterly Reports on
Form10-Q, in connection with any forward-looking statements
that may be made by us or our businesses generally. Such
periodic reports are available in the Investors section of our
website at http://www.phh.com and are also available at
http://www.sec.gov. Except for our ongoing obligations to
disclose material information under the federal securities
laws, applicable stock exchange listing standards and unless
otherwise required by law, we undertake no obligation to
release publicly any updates or revisions to any
forward-looking statements or to report the occurrence or
non-occurrence of anticipated or unanticipated events.
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
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PHH CORPORATION |
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By: |
/s/ William F. Brown |
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Name: |
William F. Brown |
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Title: |
Senior Vice President, General Counsel and Secretary |
Dated: December28, 2016
EXHIBITINDEX
|
Exhibit Number |
|
Description |
|
2.1* |
Agreement for the Purchase and Sale of Servicing Rights, |
|
|
10.1** |
Flow Mortgage Loan Subservicing Agreement, dated as of |
|
|
99.1 |
PHH Corporation press release dated December28, 2016. |
* The schedules and exhibits to this agreement have been
omitted in accordance with Item 601(b)(2)of Regulation S-K. A
copy of any omitted schedule or exhibit will be furnished to
the Securities and Exchange Commission upon request.
** Confidential treatment has been requested for certain
portions of this Exhibit