S&P cuts PHH to junk

Standard & Poor's said it lowered its ratings on PHH Corp., including its counterparty credit rating to BB+/B from BBB-/A-3.

The outlook is negative.

The downgrade reflects earnings weakness in PHH's mortgage and fleet-management businesses, which most recently has been driven by the turmoil in the mortgage and credit markets, S&P said.

PHH's mortgage business has underperformed for a number of years, the agency said. However, the relatively stable earnings generated by the fleet-management business had offset this. Although the fleet-management business remains profitable, lost business momentum and increased funding costs have reduced the magnitude of this offset, contributing to what the agency expects to be a wider consolidated net loss for full-year 2008, S&P said.

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