PHH Corp. has upsized its debt offering to $220 million and has priced it at 6%. The underwriters have a 30-day over-allotment allowance of $30 million.
The notes are convertible into cash and, if applicable, PHH common stock at $12.79 per share.
That is approximately 25% above the Jan. 10 closing price of $10.23 per share. This offering is expected to close on Jan. 17.
As of noon on Jan. 11, the common stock of the Mt. Laurel, N.J.-based company was trading at $10.68 per share, up over 4% from the previous close.
Interest is payable on June 15 and Dec. 15 each year and the notes mature on June 15, 2017. The notes are senior unsecured obligations and rank equally with other PHH existing and future senior unsecured debt. They are not redeemable prior to the maturity date.
In December, PHH pulled a $250 million debt offering and replaced it with an add-on offering of $100 million. The goal of the original offering, as well as the add-on and this offering is to repay $250 million of debt due on April 15.
But as a result of the cancellation of the original offering, Standard Poor’s downgraded PHH to “BB-.” In addition company president and CEO Jerome Selitto resigned and was replaced by chief operating officer Glen Messina.
As for the new offering, SP rated it “BB-.” It expects PHH will build sufficient liquidity to repay the $423 million debt maturing in March 2013.
Fitch Ratings said prior to the pricing announcement it expected to rate this offering at “BB+,” the same as it would have done the original offering. However, it placed PHH’s ratings on Ratings Watch Negative.
“Today’s action reflects PHH’s heightened focus on liquidity and capital management following the company’s unsuccessful issuance of $250 million in senior unsecured notes in the fourth quarter of 2011 and the subsequent announcement of the change in the company’s leadership,” the statement said. It also believes PHH will have to access the public debt markets to pay off notes due in 2013.
Moody’s revised its outlook for PHH to negative, stating it might upgrade it to stable “once the company further develops and is able to execute on a more robust short-to-medium term liquidity plan.”
But it could downgrade its Baa rating on PHH “if the company is unable to execute on its updated liquidity plan as well as generate sufficient liquidity to repay the $421 million 2013 unsecured debt approximately six months in advance of its March 2013 maturity.”
PHH said the remainder of the proceeds from this debt offering would be used for general corporate purposes.