Sep. 23, 2009 (Business Wire) -- PHH Corporation (NYSE:PHH) ("PHH" or the "Company") today announced its intention to offer $200 million aggregate principal amount of convertible senior notes due 2014 (the "notes"), subject to market and other conditions. PHH also expects to grant the initial purchasers a 25-day over-allotment option to purchase up to an additional $30 million aggregate principal amount of notes. The notes will be convertible, under certain circumstances, into cash and, if applicable, shares of PHH's common stock based on a conversion rate to be determined. The interest rate, conversion price and other terms of the notes will be determined at the time of pricing of the offering. The notes will be the Company's senior unsecured obligations and will rank equally with all of its existing and future senior unsecured debt and senior to all of its existing and future subordinated debt.
PHH intends to use a portion of the net proceeds of the offering to pay PHH's cost of the convertible note hedge transactions described below, taking into account the proceeds to PHH of the warrant transactions described below, and to use the balance of the net proceeds of the offering to reduce a portion of the amounts outstanding under PHH's Amended and Restated Competitive Advance and Revolving Credit Agreement due 2011. This offering is part of PHH's overall financing strategy to diversify PHH's funding sources. Additionally, the offering would extend and diversify a portion of PHH's debt maturities which PHH believes improves its overall liquidity.
In connection with the offering, PHH intends to enter into one or more convertible note hedge transactions with one or more counterparties, which may include one or more of the initial purchasers or their respective affiliates and which are expected to generally reduce the potential dilution upon future conversion of the notes. PHH also intends to enter into one or more warrant transactions with such counterparties. These transactions could have a dilutive effect on the Company's earnings per share to the extent that the price of its common stock exceeds the strike price of the warrants. If the initial purchasers exercise their over-allotment option, PHH may sell additional warrants and use a portion of the net proceeds from the sale of the additional notes and the sale of the additional warrants to increase the size of the convertible note hedge transactions. PHH has been advised that, in connection with establishing their initial hedge of the convertible note hedge and warrant transactions previously referenced, the counterparties and/or their respective affiliates expect to enter into various derivative transactions with respect to PHH's common stock concurrently with, or shortly after, the pricing of the notes.
