Blackstone Drops Plans to Acquire Mortgage Company

Laurel, N.J.–PHH Corp. announced Tuesday that asset manager Blackstone Group LP and a unit of General Electric Co. would not be acquiring the Mount Laurel, N.J., mortgage originator and fleet management service because Blackstone couldn’t raise the $1.7 billion required for the deal, The Wall Street Journal reports.Blackstone’s inability to finance the deal–considered small by most standards–could indicate that putting together large debt packages to finance buyouts in the future would prove difficult, the Journal says.Although the deal was signed in March, earlier this summer, J.P. Morgan and Lehman Brothers Holdings Inc., which also had agreed to fund the deal, notified Blackstone that they did not want to put up $750 million of the $3.5 billion in debt financing. PHH says that Blackstone owes it a $50 million break-up fee.According to the Journal, a person familiar with the deal said the banks were hesitant because of the reduced demand for mortgage-related debt–which meant they would have to incur paper losses of as much as $500 million.Blackstone denied the mortgage market influenced its decision not to go through with the arrangement. “Blackstone did everything it was capable of doing to close this deal,” Peter Rose, a spokesman for the New York private-equity firm, told the Journal.