Form 8k
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): August 16,
2006
PHH
CORPORATION
(Exact
name of registrant as specified in its charter)
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MARYLAND
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1-7797
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52-0551284
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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3000
Leadenhall Road
Mt.
Laurel, New Jersey 08054
(Address
of principal executive offices, including zip code)
(856)
917-1744
(Registrant’s
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item
8.01. Other Events.
Tender
Offer and Consent Solicitation for Public Notes
On
August
16, 2006, PHH Corporation (“PHH”,
“Company”, “we” or “our”) announced the commencement of a cash tender offer and
consent solicitation (the “Offer”) to the holders
(the “Noteholders”) of our public notes in the aggregate principal amount of
$1.081 billion (collectively, the “Public Notes”). If the Offer is successful,
we will do one or a combination of the following: (i) retire the outstanding
Public Notes from tendering Noteholders, or (ii) obtain consent (the “Consent”)
from
the
holders of at least a majority in principal amount of the outstanding Public
Notes to (a) amend certain provisions of the Indenture
governing the Public Notes, dated as of November 6, 2000 by and between PHH
and
J.P. Morgan Trust Company, N.A. (as successor trustee for Bank One Trust
Company, N.A.) (as amended and supplemented to the date hereof, the
“Indenture”) regarding,
among other things, the requirement to file with the Securities and Exchange
Commission (“SEC”) and the trustee the annual reports, quarterly reports and
other documents (the “SEC Reports”) that we are required to file with the SEC
pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (b) waive certain defaults and potential
events of default under the Indenture.
Noteholders who tender their Public Notes will be deemed to have provided their
Consent.
A copy
of our press release relating to the Offer is attached to this Current Report
on
Form 8-K as Exhibit 99.1 and is incorporated herein by reference. There can
be
no assurance that the Noteholders will tender their Public Notes or provide
the
Consent requested. We
have
not received a notice of default from the Noteholders or the trustee under
the
Indenture. If we receive such a notice and the default or defaults are not
cured
within 90 days of the notice, the Noteholders would be entitled to cause the
principal amount and accrued and unpaid interest on the Public Notes to become
immediately due and payable.
As
previously disclosed in our Current Report on Form 8-K filed on July 24, 2006,
we
entered into an unsecured $750 million Credit Agreement, dated July 21,
2006, (the “Credit Agreement”) and the Credit Agreement provides us $750
million of capacity solely for the repayment of the Public Notes. The capacity
under the Credit Agreement together with the excess capacity available under
our
existing unsecured credit facilities provides sufficient liquidity to fund
the
outstanding balance of the Public Notes.
Liquidity
and Waivers
We
continue to believe we have adequate liquidity to fund our operating cash needs.
We have previously obtained certain waivers and continue to seek additional
waivers extending the date for delivery of our audited financial statements,
or
the audited financial statements of our subsidiaries, and other documents
related to such financial statements to certain lenders, trustees and other
third parties in connection with certain of our financing, servicing, hedging
and related agreements and instruments (collectively, our “Financing
Agreements”).
As
previously disclosed in our Current Report on Form 8-K filed on July 21,
2006,
Bishop’s
Gate Residential Mortgage Trust (“Bishop’s Gate”), a consolidated special
purpose entity, received a notice (the “Notice”), dated July 10, 2006, from The
Bank of New York, as Indenture Trustee (the “Trustee”), that certain events of
default had occurred under the Base Indenture dated December 11, 1998 (the
“Bishop’s Gate Indenture”) between the Trustee and Bishop’s Gate, pursuant to
which Bishop’s Gate Residential Mortgage Loan Medium Term Notes, Variable Rate
Notes, Series 1999-1, Due 2006 and Variable Rate Notes, Series 2001-2, Due
2008
(collectively, the “Notes”) were issued. The total principal outstanding under
the Notes is $800 million. The Notice indicated that events of default occurred
as a result of Bishop’s Gate’s failure to provide the Trustee with our and
certain other audited annual and unaudited quarterly financial statements
as
required under the Bishop’s Gate Indenture. While the Notice further informed
the holders of the Notes of these events of default, the notice received
did not
constitute a notice of acceleration of repayment of the Notes. The Notice
created an event of default under the Amended and Restated Liquidity Agreement
dated as of December 11, 1998, as further amended and restated as of December
2,
2003, (the “Bishop’s Gate Liquidity Agreement”) among Bishop’s Gate,
certain banks listed therein and JPMorgan Chase Bank, as Agent. The Bishop’s
Gate Liquidity Agreement supports commercial paper issued by Bishop’s Gate.
We
have
received all of the required approvals and executed
a
Supplemental Indenture to the Bishop’s Gate Indenture waiving any event of
default arising as a result of the failure to provide the Trustee with our
and
certain other audited annual and unaudited quarterly financial statements as
required under the Bishop’s Gate Indenture. This waiver will be effective
provided that such financial statements are delivered to the Trustee and the
rating agencies on the earlier of December 31, 2006 or the date on or after
September 30, 2006 by which such financial statements are required to be
delivered to the bank group under the Bishop’s Gate Liquidity Agreement. Also
executed was a related waiver of the default under the Bishop’s Gate
Liquidity Agreement caused by the Notice under the Bishop’s Gate Indenture for
failure to deliver the required financial statements. A previously
obtained waiver under the Bishop’s Gate Liquidity Agreement extended the date by
which such financial statements are to be delivered to September 30, 2006,
unless the principal amount of any indebtedness issued under our Public Notes
Indenture shall become due and payable (other than by optional redemption)
prior
to such date. Bishop’s Gate maintains committed capacity of approximately $2.4
billion to fund eligible mortgage loans.
Our
revolving credit facilities and various other Financing Agreements require,
among other things that the Company file, and/or deliver to the various lenders
and trustees (within various specified periods of time), our financial
statements or the financial statements of our mortgage services segment. We
have
discussed the accounting matters disclosed in our previously-filed Current
Reports on Form 8-K with our principal lenders and trustees under our revolving
credit facilities and various other Financing Agreements. As previously
disclosed, we have obtained waivers under our $1.3 billion Five-Year Amended
and
Restated Competitive Advance and Revolving Credit Agreement, our $500 million
Revolving Credit Agreement, and certain other facilities waiving certain
potential breaches of covenants under those instruments and extending the
deadline (the “Extended Deadline”) for the delivery of our financial statements
and/or our 2005 annual servicing report to the various lenders under those
instruments until September 30, 2006, unless the principal amount of any
indebtedness issued under our Public Notes Indenture shall become due and
payable (other than by optional redemption) prior to such date. We have not
received any notices of default accelerating our payment of our currently
outstanding indebtedness.
Under
certain of our Financing Agreements, the lenders or trustees have the right
to
notify us if they believe we have breached a covenant under the operative
documents and may declare an event of default. If we receive notice and are
unable to cure the events of default or obtain necessary waivers within the
required time periods or certain extended time periods, the maturity of some
of
our debt could be accelerated and our ability to incur additional indebtedness
could be restricted. Moreover, defaults under certain of our Financing
Arrangements would trigger cross-default provisions under certain of our other
Financing Arrangements.
There
can
be no assurance that any required waivers under any of our Financing Agreements
will be received on a timely basis, if at all, or that any waivers obtained,
including the waivers we have already obtained as described above, will extend
for a sufficient period of time to avoid an acceleration event, an event of
default or other restrictions on our business operations. Moreover, failure
to
obtain waivers could be material and adverse to our business, liquidity and
financial condition.
Class
Action and Derivative Litigation
In
March
and April, 2006, several class actions were filed against PHH,
its
Chief Executive Officer and its former Chief Financial Officer in
the
United States District Court for the District of New Jersey. The plaintiffs
purport to represent a class consisting of all persons (other than PHH's
officers and directors and their affiliates) who purchased the Company’s common
stock between May 12, 2005 and March 1, 2006 (the "Class Period"). The
plaintiffs allege among other things, that the defendants violated Section
10(b)
of the Exchange Act and Rule 10b-5 thereunder by failing to make complete
and accurate disclosures concerning the Company’s reported deferred tax assets
and net income during the Class Period. The individual defendants are also
alleged to be liable under Section 20(a) of the Exchange Act.
Also
in
March and April, 2006, two derivative actions were filed in the United States
District Court for the District of New Jersey against PHH, its former Chief
Financial Officer and each member of its Board of Directors. One of these
derivative actions has since been voluntarily dismissed by the plaintiff. The
remaining derivative action alleges
breaches of fiduciary duty and related claims based on substantially
the same factual allegations as
to
reported deferred tax assets and net income as
the
class actions described above
as
well
as based on an alleged overstatement of goodwill.
We
intend
to vigorously defend against these actions. Due to the inherent uncertainties
of
litigation and because these actions are at a preliminary stage, we cannot
predict the ultimate outcome of these matters at this time.
Item
9.01. Financial Statements and Exhibits.
Forward-Looking
Statements
This
Current Report on Form 8-K and Exhibit 99.1 hereto contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933,
as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are subject to known and unknown risks, uncertainties and
other
factors which may cause our actual results, performance or achievements to
be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. You should understand
that these statements are not guarantees of performance or results and are
preliminary in nature. Statements preceded by, followed by or that otherwise
include the words “believes”, “expects”, “anticipates”, “intends”, “projects”,
“estimates”, “plans”, “may increase”, “may result”, “will result”, “may
fluctuate” and similar expressions or future or conditional verbs such as
“will”, “should”, “would”, “may” and “could” are generally forward-looking in
nature and not historical facts.
You
should consider the areas of risk described under the heading “Cautionary Note
Regarding Forward-Looking Statements” in our periodic reports under the
Securities Exchange Act of 1934, as amended, and those risk factors included
as
Exhibit 99 thereto, titled “Risk Factors Affecting our Business and Future
Results,” in connection with any forward-looking statements that may be made by
us and our businesses generally. Except for our ongoing obligations to disclose
material information under the federal securities laws, we undertake no
obligation to release publicly any updates or revisions to any forward-looking
statements, to report events or to report the occurrence of unanticipated events
unless required by law.
SIGNATURE
Pursuant
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:
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/s/
Clair M. Raubenstine
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Name:
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Clair
M. Raubenstine
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Title:
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Executive
Vice President and Chief Financial Officer
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Dated:
August 16, 2006
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