Sep. 23, 2009 (Business Wire) -- PHH Corporation (NYSE:PHH) ("PHH" or the "Company") announced today the pricing of $220 million in aggregate principal amount of 4.00% Convertible Senior Notes Due 2014 (the "notes"). PHH has also granted the initial purchasers of the notes a 25-day over-allotment option to purchase up to $30 million additional aggregate principal amount of the notes (subject to certain limitations). The notes will be convertible into cash and, if applicable, shares of PHH's common stock based on an initial conversion rate for the notes of 38.7522 shares of PHH's common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $25.805 per share of common stock and represents an approximately 30% conversion premium over the last reported sale price of PHH's common stock on September 23, 2009, which was $19.85 per share. The conversion rate and the conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. PHH expects to close the notes offering on or about September 29, 2009, subject to the satisfaction of various customary closing conditions.
Interest on the notes will be payable semiannually in arrears on March 1 and September 1 of each year, beginning March 1, 2010. The notes will mature on September 1, 2014, unless previously converted in accordance with their terms prior to such date. The notes will be PHH's senior unsecured obligations and will rank equally with all of PHH's existing and future senior unsecured debt and senior to all of its existing and future subordinated debt. The notes are not redeemable by PHH prior to the maturity date.
In connection with this offering of the notes, PHH entered into convertible note hedge transactions with affiliates of certain of the initial purchasers of the notes. These transactions are expected generally to reduce the potential dilution upon conversion of the notes. PHH also entered into warrant transactions with the same counterparties. The warrant transactions could have a dilutive effect on PHH's earnings per share to the extent that the price of PHH's common stock exceeds the strike price of the warrants, which is $34.74 (approximately 75% higher than the closing price of PHH's common stock on September 23, 2009). 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 by the counterparties that, in connection with establishing their initial hedges of these transactions, they and/or their respective affiliates expect to enter into various derivative transactions with respect to PHH’s common stock.
